Date of Report
October 11, 2024
Prepared by
Maybank Investment Bank Berhad
Company Overview
Bursa Malaysia (BURSA MK) is one of the larger bourses in ASEAN, hosting 995 publicly listed companies and 19 REITs. It is also the world’s largest palm oil futures trading hub. As of the end of 2023, the total market capitalization of Bursa Malaysia stood at MYR1.8 trillion. The exchange has seen a range of trading activity levels over the past few years, with equity average daily value (ADV) peaking in 2020 and then stabilizing to pre-pandemic levels.
Financial Highlights and Forecasts
Revenue and Earnings
For FY24, Bursa Malaysia is expected to generate a revenue of MYR778.5 million, a significant increase from MYR616.5 million in FY23. EBITDA is projected at MYR460.7 million, representing a growth of 29.7% year-over-year. The core net profit for FY24 is estimated at MYR313 million, marking a 24% increase compared to the previous year. These positive outlooks are driven by robust trading activity across both the equity and derivative markets.
Profitability Ratios
- Core P/E ratio for FY24: 24.8x
- Dividend yield for FY24: 3.8%
- ROAE (Return on Average Equity) for FY24: 36.9%
The projected net dividend yield for FY24 is 3.8%, rising to 4.0% in FY25. Bursa Malaysia has maintained a payout ratio of over 90% for dividends since its listing in 2005, consistently rewarding shareholders.
Trading Activity and Market Performance
Equity Trading
The average daily value (ADV) for equity trades in 3Q24 was MYR3.8 billion, slightly lower than 2Q24’s MYR3.9 billion due to more trading days. Despite this, the 9M24 trading volume was up 25% year-over-year, with the net profit for the first nine months of 2024 estimated at MYR240 million, compared to MYR193 million for the same period in 2023.
Derivatives Trading
The derivatives market also saw strong performance in 3Q24, with total contracts traded rising by 15% quarter-on-quarter. Futures contracts for crude palm oil (FCPO) and the FTSE Bursa Malaysia KLCI (FKLI) both contributed significantly to this increase, with volumes rising by 14% and 16%, respectively.
Foreign Shareholding and Valuation
Foreign shareholding in Bursa Malaysia has risen sharply in 2024, reaching 20.5% as of September 30, 2024, which is a 7.3 percentage point increase year-to-date. Bursa Malaysia is currently trading at 24x forward 12-month earnings, which is above its 10-year average PER of 22x. The stock’s relative attractiveness may be affected by market volatility, making it vulnerable to profit-taking.
Strategic Initiatives
Sustainability and ESG
Bursa Malaysia has taken significant steps in promoting sustainability, particularly through the introduction of the FTSE4Good Bursa Malaysia Index in 2014 and the launch of the Bursa Carbon Exchange (BCX) in December 2022. Bursa Malaysia is committed to achieving net zero greenhouse gas emissions by 2050 and has already achieved carbon neutrality for three consecutive years, including 2023.
The company has also implemented various internal sustainability practices, such as reducing its electricity consumption by 20% from 2017 to 2023, and recycling efforts which reduced paper waste by 59% year-on-year in 2023.
Dividend History and Capital Management
Bursa Malaysia has a strong track record of active capital management, paying over 90% of its profits as dividends since its listing. In addition to regular dividends, the company has paid several special dividends in the past from its FY06, FY07, FY13, FY14, FY17, FY18, and FY20 profits.
Risk Factors
Upside Risks
- Higher-than-expected equity trading activities.
- Increased volatility in palm oil prices and the FTSE Bursa Malaysia KLCI, boosting derivative market activities.
Downside Risks
- Lower liquidity, which could reduce equity ADV.
- A decrease in derivative market activities.
- The possibility of foreign fund retracement, which could negatively impact the stock.
This summary encapsulates the key insights from the Maybank Investment Bank’s research on Bursa Malaysia as of October 11, 2024.
