JUNE 7 — Bursa Malaysia said it will remain focused on developing its securities, derivatives and Islamic markets.

It said the underlying strong fundamentals of the Malaysian economy and the steady economic growth prospects are expected to continue to support the confidence of investors. 

Ample liquidity in the financial system is also sufficient to support the capital market over the medium term.

The company just announced earnings for Q1 FY14:

Revenue: +12per cent to RM 123.2 million Profit: +18per cent to RM 45.1 million Cash flow from operations: RM 61.6 million vs RM 59.4 million Dividend: 0 sen per share vs 0 sen per share

Bursa said its operating revenue improved due to its securities market revenue, which improved due to higher trading revenue and listing and issuer services. 

The securities market’s segment profit was up by 28per cent to RM 68.3 million from Q1FY13. The higher profit was mainly due to higher trading value on the securities market.

The derivatives market’s segment profit decreased by 18per cent to RM 12 million. Despite higher trading volume in Q1, the derivatives market segment profit was lower as result of lower guarantee and collateral management fees earned. 

Bursa Malaysia is Malaysia’s stock exchange.

1. Is the constant increase in staff costs justified?

Bursa’s operating expenses had increased by 10per cent year on year due to higher staff costs, which rose 20per cent to RM 32.6 million, IT maintenance and service fees. 

In Q4 FY13, its staff costs increased year on year by 33per cent to RM 36 million, which RHB said reflected a higher variable cost component due to the good results.

For FY13, its staff costs increased by about 12per cent to RM 120 million, with increases in every quarter.

Does the increase in staff costs justify the talent it is attracting and retaining? Does it intend to stem the constant increase in staff costs? When will this plateau?

2. Why the weaker guarantee and collateral management fees?

In Bursa’s derivatives market, derivatives trading income dropped by 7per cent year on year to RM 17.2 million in Q1FY14, due to lower guarantee and collateral management fees. 

According to page 113 of Bursa’s 2013 annual report, guarantee and collateral management fees fall under its Other Derivatives Revenue. And according to the past three quarters’ financial reports, Bursa’s Other Derivatives Revenue has been decreasing for the past three quarters. It dropped this quarter by 25per cent to RM 3.7 million. This is despite growth in its overall derivatives trading revenue.

Why is Bursa’s guarantee and collateral management fees decreasing?

3. At what percentage of foreign shareholdings is Bursa comfortable?

As of April 2014, Bursa’s foreign shareholding has decreased to 21.9per cent from a rather high 23.6per cent back in December. A high foreign shareholding carries a risk that comes with any heavy foreign selling in the region.

Does Bursa have an internal limit to its foreign shareholding?

Bursa’s operating expenses had increased by 10 per cent year on year due to higher staff costs, which rose 20per cent to RM 32.6 million, IT maintenance and service fees. — Reuters pic

4. Why the delay in releasing the Environmental, Social and Governance Index?

Bursa has been talking about releasing the Environmental, Social and Governance (ESG) Index since 2011.

CEO Dato’ Tajuddin Atan said in the latest media release for Bursa’s results that “We are also working towards initiating the Environmental, Social and Governance Index to improve our visibility in the regional space.”

But the index still has not materialised. What are the problems in implementing it? 

5. Can its listings in H2 surpass 2012’s RM 22.1 billion IPO revenue?

According to a Business Times report in February quoting JPMorgan Chase and Co, the rate of IPO issuance this year is likely to be as big as the RM 22.1 billion posted in 2012, if not bigger.

There have been only four listings this year so far, although the listings are picking up with the listing of 7-Eleven that raised about RM 731.9 million. 

According to the news report, bankers have said there are 14 other likely listings this year, including 1Malaysia Development Bhd, Boustead Plantations Bhd, Icon Offshore Bhd, Iskandar Waterfront Holdings Sdn Bhd, Medini Iskandar Malaysia Sdn Bhd, Themed Attractions and Resorts Sdn Bhd and Naza TTDI Sdn Bhd.

Last year, most of the major listings were postponed till after the elections as the climate of uncertainty would not have been suitable for IPOs. 

According to AMMB, a high number of IPOs will boost Bursa’s revenue as listing and issuer services make up a third of its stable revenue, which in turn contributes a third to the group’s overall operating revenue. 

Does Bursa see its listings in the second half of the year reaching 2012’s record of RM 22.1 billion in IPO proceeds?

6. Is it making the effort to attract listings from other countries?

The last listing by a foreign company in Bursa was in December, by China-based bamboo flooring manufacturer Kanger International.

Since then, there has been no listing by a foreign company. In fact, Kanger International was the only foreign-based company to list on Bursa in 2013. 

Bursa in 2013 hosted the Invest Asean roadshows in the United States, Hong Kong and Singapore.

Is it making links in these places and trying to attract foreign-based companies to list in Malaysia? 

7. How is it going to boost confidence in China-based companies’ stocks? China-based stocks have become a hard sell in Malaysia, with almost all of them trading below their IPO price and one falling into financial problems. The only exception to this is the most recent listing, Kanger International, which listed at 25 sen in December and is trading at around 46 sen now. 

Almost all the China-based stocks on Bursa are trading drastically below their IPO price:

Xidelang listed at 58 sen, but is now trading around 22 sen.

China Stationery listed at 95 sen, but is now trading around 13 sen. 

Xingquan listed at RM 2.10, but is now trading around 91 sen. 

Multi Sports Holdings listed at 85 sen, but is now trading around 19 sen. 

K Star Sports listed at RM 2.15 and is now trading around 11 sen. 

HB Global, formerly known as Sozo Global, listed at RM 0.80 and is now trading around 9 sen.

China Stationery listed at 95 sen and is now trading around 13 sen.

China Ouhua Winery Holdings listed at 60 sen and is now trading around 13 sen.

China Automobile Parts Holdings listed at 68 sen and is now trading around 32 sen. 

What’s more, HB Global has slipped into PN17 category, meaning it has financial difficulties. 

With a bad record, the retail investor’s confidence in China-based companies has taken a hit. What will Bursa do to remedy this situation? 

8. Is Bursa going to pursue any more China-based stock listings?

We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.

So far, we have not had a reply (which is why you are seeing this message). — Investor Central

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