KUALA LUMPUR, Jan 31 — Bursa Malaysia Bhd is expected to record a lower net profit for this financial year ending December 31, 2022 (FY22) on an anticipated softening in the average daily trading value (ADV), according to analysts.
Kenanga Investment Bank Bhd has maintained its “market perform” stance on the exchange operator with a lower target price (TP) of RM5.85 per share from RM7.60 previously, dragged by a lower estimated earnings per share (EPS) for FY22 to reflect its expectation of a softening in ADV.
“We expect ADV to soften to RM2.39 billion in 2022 and RM2.26 billion in 2023 on the lack of catalysts on the Malaysian bourse and cautious market sentiment.
“We foresee 2022 ADV to soften year-on-year (y-o-y) to RM2.39 billion from our earlier RM3 billion expectation,” it said in a research note today.
Last Friday, Bursa Malaysia reported a net profit of RM355.25 million for financial year 2021 (FY21), a six per cent y-o-y decrease from the RM377.75 million previously. The ADV for the securities market’s on-market trades stood at RM3.54 billion, down 15.9 per cent y-o-y.
The exchange’s profit after tax (PAT) of RM64.95 million for the fourth quarter (Q4) of 2021 brought its FY21 PAT to RM355.25 million, which Kenanga said met consensus’ expectation but fell short of Kenanga’s target mainly due to higher-than-expected costs.
On the projected lower ADV in FY22, the investment bank said this continued the FY21 trend of quarter-on-quarter softening of ADV premised on weaker market sentiment on likely Federal Reserve (Fed) or Bank Negara Malaysia rate hikes, lack of catalysts across local sectors, and continued softening of retail ADV, with substantial downside risks.
Meanwhile, CGS-CIMB Securities is forecasting a 39.4 per cent drop in Bursa Malaysia’s FY22 net profit based on its projection of a 34.1 per cent decline in the equity ADV from RM3.55 billion in FY21 to RM2.33 billion this year, as well as additional tax expense under Cukai Makmur (prosperity tax).
“Our expectation of a lower FY22 equity ADV is premised on a higher stamp duty rate, lower retail interest following the end of movement control measures in the third quarter of 2021, and potential hike in overnight policy rate in the second half of 2022,” the stockbroking firm said.
CGS-CIMB retained its “hold” call on Bursa Malaysia, saying that the market appeared to have priced in the exchange’s weaker earnings prospects.
“We keep our FY22-23 EPS forecasts and TP of RM6.59, which is pegged to a five-year historical price per earnings of 21.1 times,” it added.
In its note, MIDF Research maintained its “buy” call on Bursa Malaysia with a revised TP of RM7.45 per share compared with RM8.20 previously.
“We have seen a weakness in trading activities in Q4 FY21 and it may spill over into Q1 FY22 due to volatility caused by US Fed’s hawkish stance and geopolitical issues.
“However, we expect that trading activities will rebound once the dust settles. Furthermore, we have seen interest from foreign investors starting to return,” it said.
Based on the fund flows from Bursa, MIDF shared that foreign investors recorded a net inflow of RM463.5 million in January this year.
“Although it is still early days, FY22 could potentially see a reverse from prior years. We believe the recent share price decline means that the stock is currently undervalued,” it noted.
As at 12.27pm, Bursa Malaysia shares rose eight sen to RM6.26 with 628,800 shares traded. — Bernama
