KUALA LUMPUR, Jan 31 ― Research houses have mixed views on Bursa Malaysia Bhd (BMB) as the market is constantly rocked by many unfavourable global events, dampening investor’s confidence in local equities.
Kenanga Investment Bank Bhd, which has maintained an “outperform” call on the stock exchange operator, sees buying opportunity for the stock, premised on a stronger 2020 outlook which is believed to be conservative.
It said the market was dragged by the US-China trade war, geopolitical tensions and recently, the 2019 novel coronavirus outbreak that had impacted the tourism and travel-related counters.
“This has dampened the FTSE Bursa Malaysia KLCI to linger below the 1,550-level. We view these factors as short-term dampeners to be overcome by possible revival of mega projects to likely improve market sentiment and rate cut to boost spending,” it said in a note today.
With a target price (TP) of RM6.50, Kenanga however said the risks to its call included lower-than-expected trading volume in the securities and derivatives markets, higher-than-expected operating expense and less initial public offerings.
Meanwhile, RHB Investment Bank Bhd has maintained a “buy” call with a TP of RM6.40 following the stronger derivatives average daily contracts (DADC) traded at 63,044 in the fourth quarter 2019 (Q4 2019), up by seven per cent quarter-on-quarter (q-o-q).
“The rise was due to crude palm oil futures (FCPO) contracts traded which surged 12 per cent q-o-q. (FCPO contracts accounted for 80 per cent share of total contracts traded in Q4 2019).
“Factoring in the recent strength in FCPO contract volume, we assume a 2020 forecast DADC at 58,141, up from 2019’s 55,372,” it said.
Meanwhile, MIDF Amanah Investment Bank Bhd has a “neutral” call on BMB, saying that despite some improvement seen in Q4 of its financial year 2019 (Q4 FY19), it was not enough.
“BMB posted a profit after tax and minority interests in FY19 which was a shade below our expectations at 94.0 per cent of our full-year estimate. Nevertheless, it was within the consensus’ estimate at 95.1 per cent.
“The variance was due to our underestimation of other operating expenses. We also saw some improvement in revenue in the Q4FY19 and the operating revenue in Q4 FY19 improved slightly by 1.3 per cent year-on-year and 4.4 per cent q-o-q. However, operating expenses grew at faster pace.”
Maybank Investment Bank Research and AmInvestment Bank both maintained a “hold” call on BMB, with Maybank IB saying the concerns had been priced in and its FY19 net profit was within its expectations as well as the market’s.
AmInvestment said in Q4 2019, foreign fund flows into equities on a cumulative basis registered an outflow of RM3.2 billion, similar to that in Q3 2019.
“The outflow of funds was only slightly lower than Q2 2019 of RM3.3 billion. Foreign investors continued to be net sellers of equities in October, November and December 2019,” it said.
Maybank IB and AmInvestment had set a TP of RM5.85 and RM6.05 respectively.
Affin Hwang Capital meanwhile has maintained a “sell” call on the counter with a TP of RM5.15.
“We are of the view that headwinds such as the risk of a global epidemic from the coronavirus outbreak, and/or prolonged geopolitical and trade tensions will further weaken investor sentiment and drive fund outflows,” it said.
As at lunch break, BMB fell four sen to RM5.64 with 1.13 million shares transacted. ― Bernama
