by NUR HANANI AZMAN / pic by MUHD AMIN NAHARUL
BURSA Malaysia Bhd is expected to deliver strong quarterly earnings in the fourth quarter of financial year 2020 ended Dec 31 (4QFY20), driven by stronger trading momentum that held up in January, signalling a strong start of the year.
Maybank Investment Bank Bhd’s (Maybank IB) analyst Wong Chew Hann said January’s equity average daily trading value (ADV) has stayed robust at RM5.05 billion due to aggressive retail participation during the Movement Control Order and positive news of vaccine rollout.
Maybank IB estimates Bursa’s FY20E net profit to grow by 10%-11%.
“We think an ADV of RM4 billion is the new base amid a low interest rate environment persisting until end-2021 at least.
“We raise equity ADV assumptions and earnings forecasts with our new target price (TP) of RM10.05 (+10%) based on unchanged 23 times FY21E price-to-earnings ratio pegged,” Wong noted in a research report.
He further noted that trading momentum has been unfazed by the upliftment in regulated short selling suspension on Jan 1, 2021 (in place since March 23, 2020), with retail participation remaining high at 39% month-to-date (2020: 37%, 2019: 24%).
“The last three months of 2020, too, saw high ADVs of RM4.37 billion (October), RM5.25 billion (November) and RM5.32 billion (December), bringing 2020 ADV to RM4.31 billion (+100% YoY), above our RM4 billion forecast,” said Wong.
Malacca Securities Sdn Bhd head of research Loui Low also said Bursa’s ADV should remain above RM4 billion to RM4.5 billion in 2021.
“Outlook for Bursa’s still decent as the start of the year’s trading value is still higher in January.
“I think the retail participation should be quite alright for now,” he told The Malaysian Reserve (TMR).
Bursa’s FY20 results are tentatively due for release today.
Bursa’s net profit more than doubled to RM121.93 million for the 3Q20, compared to RM47.1 million in the same quarter last year amid improved performance on the securities and derivatives market.
Revenue stood at RM237.74 million versus RM122.67 million previously.
Bursa CEO Datuk Muhamad Umar Swift said investor participation in the securities market continued to increase, with ADV growing by 101.8% to RM4 billion in the first nine months of 2020 (9M20) compared to RM2 billion in 9M19.
“While key economic indicators are pointing towards an improving outlook for the Malaysian economy, the ongoing developments of the Covid-19 pandemic will continue to influence the volatility and performance of the securities and derivatives markets.
“We have been working closely with other regulators to ensure market efficiency and improved market accessibility and liquidity to support participants during this period,” he said in a statement.
Muhamad Umar said despite the challenges, Bursa is well-positioned to continue developing the marketplace and make further progress on its strategic plans.
“We have seen promising results after successfully conducting five listing ceremonies and holding our flagship events fully virtual, namely Invest Malaysia Conference and Palm and Lauric Oils Price Outlook Conference & Exhibition.
“Each of these initiatives is important towards making our offerings and our market continue to remain relevant to our diverse range of investors,” he explained.
Read our earlier report