KUALA LUMPUR (Jan 19): MIDF Research has maintained its Neutral call on BURSA MALAYSIA BHD [] and raised its target price (TP) to RM6.20 from RM5.90 previously.
The research house said on Thursday that its Neutral recommendation was premised on its KLCI target of 1,530 points for 2012 that implies limited upside to the equity market from the present index level.
“We reiterate that the stock now trading at 28.4x PER to our EPS forecast for FY12 is pricier than regional peers based on our comparison to the average PER of Singapore and Hong Kong exchange stocks and
“Although we are positive on the derivative trading revenue of Bursa moving forward, we are expecting a lower trading revenue for equities with an imputation of a lower assumption of daily average trading volume (DATV) for equities of RM1.5 billion for 2012 (11.8% lower than FY11 of RM1.7 billion).
MIDF Research said that in 4Q11 that even though the index had surged upwards, the DATV in 4Q11 was lower compared to the previous quarter.
Overall, the equity’s trading revenue would continue to account for a significant portion of Bursa’s revenue compared to derivatives income, it said.
“Hence, with an expected lower average DATV for 2012, we are projecting a lower net profit for FY12.
“Our TP has been revised upwards to RM6.20 (previously RM5.90) based on a forward PER of 24.7x (1 standard deviation below historical 5 years average mean) on FY12 EPS or 3.7x PBVR,” it said.
MIDF Research said the catalysts for revision in earnings would be: i) Stronger than expected capital market fund raising activities through IPOs thus raising the market capitalisation of the equity market, ii) attraction of more foreign funds into equities to raise the trading value of equities, iii) increase in potential M&As to spur the interest in trading of equity stocks and iv) further structural improvements by Bursa to increase the trading of securities.
The research house said on Thursday that its Neutral recommendation was premised on its KLCI target of 1,530 points for 2012 that implies limited upside to the equity market from the present index level.
“We reiterate that the stock now trading at 28.4x PER to our EPS forecast for FY12 is pricier than regional peers based on our comparison to the average PER of Singapore and Hong Kong exchange stocks and
“Although we are positive on the derivative trading revenue of Bursa moving forward, we are expecting a lower trading revenue for equities with an imputation of a lower assumption of daily average trading volume (DATV) for equities of RM1.5 billion for 2012 (11.8% lower than FY11 of RM1.7 billion).
MIDF Research said that in 4Q11 that even though the index had surged upwards, the DATV in 4Q11 was lower compared to the previous quarter.
Overall, the equity’s trading revenue would continue to account for a significant portion of Bursa’s revenue compared to derivatives income, it said.
“Hence, with an expected lower average DATV for 2012, we are projecting a lower net profit for FY12.
“Our TP has been revised upwards to RM6.20 (previously RM5.90) based on a forward PER of 24.7x (1 standard deviation below historical 5 years average mean) on FY12 EPS or 3.7x PBVR,” it said.
MIDF Research said the catalysts for revision in earnings would be: i) Stronger than expected capital market fund raising activities through IPOs thus raising the market capitalisation of the equity market, ii) attraction of more foreign funds into equities to raise the trading value of equities, iii) increase in potential M&As to spur the interest in trading of equity stocks and iv) further structural improvements by Bursa to increase the trading of securities.
