Introduction to Bursa Malaysia’s Performance

Bursa Malaysia, a prominent exchange holding company in ASEAN, reported a strong performance for FY24 despite a weaker fourth quarter. The net profit for FY24 reached MYR310 million, marking a 23% year-over-year (YoY) increase. This was driven by higher trading and non-trading revenues. However, the fourth quarter saw a 20% quarter-over-quarter (QoQ) decline in net profit due to lower operating revenue and increased seasonal operating expenses.

Key Financial Highlights

The FY24 financial performance showcased robust growth across various segments:

• Operating Revenue: Increased 27.8% YoY to MYR757.7 million, driven by higher equity and derivatives trading revenue, along with non-trading revenue.
• Equity Average Daily Value (ADV): Rose 50% YoY to MYR3.44 billion, contributing to a 43% YoY growth in equity trading revenue.
• Derivatives Trading Revenue: Jumped 27% YoY, fueled by a 28% increase in FCPO contracts and a 25% rise in FKLI contracts.
• Non-Trading Revenue: Increased 11% YoY, supported by higher listing and issuer services fees (55 IPOs compared to 42 in FY23), depository services fees, and market data fees from a growing subscriber base.
• Cost-to-Income Ratio (CIR): Remained stable at 47.7%, reflecting effective cost management.

Dividend Performance

Bursa Malaysia announced dividends that positively surprised investors. The FY24 dividend payout included an 18 sen final DPS and an 8 sen special DPS, bringing the total to 26 sen. This reflects a dividend payout ratio (DPR) of 94% (excluding the special dividend).

FY25 Outlook and Revised Forecasts

In light of a potentially cautious trading environment influenced by a “Trump 2.0” landscape, Maybank Investment Bank revised its assumptions for FY25:

• Equity ADV: Forecasted to decline to MYR3 billion from MYR3.7 billion previously estimated.
• Derivatives Trading: Expected to remain flat YoY.
• Net Profit: Adjusted downward to MYR281 million, representing a 9.3% YoY decline.
• Dividend Payout Ratio: Assumed to remain at 95% for FY25.

As a result, the target price (TP) for Bursa Malaysia was lowered to MYR8.35, with a “HOLD” recommendation.

Operational Metrics and Market Insights

Bursa Malaysia’s operational metrics reflected mixed trends:

• Trading Velocity: Achieved 39% in FY24, up from 29% in FY23.
• IPO Performance: A total of 55 IPOs were listed in FY24, generating a MYR31 billion market cap. For FY25, Bursa targets 60 IPOs with a projected market cap of MYR40 billion.
• Carbon Credit Trading: Revenue surged 4,939% YoY, albeit from a low base, reflecting increased market activity.
• Foreign Institutional Participation: ADV rose 89% YoY, while domestic institutional ADV increased by 53% and retail ADV by 17%.

Comparative Peer Analysis

Bursa Malaysia’s valuation metrics were analyzed against regional peers:

• Price-to-Earnings (P/E): Bursa’s P/E stood at 24.4x for FY25, lower than the peer average of 26.1x.
• Price-to-Book Value (P/BV): Bursa’s P/BV ratio of 8.5x exceeded the peer average of 4.4x, reflecting its strong dividend payout history.
• Return on Equity (ROE): Bursa reported an impressive ROE of 33.4%, significantly higher than the peer average of 17.7%.
• Dividend Yield: Bursa’s yield of 3.9% for FY25 was above the peer average of 2.5%.

Historical Performance and Key Drivers

Bursa Malaysia’s historical performance highlights its resilience and adaptability:

• Equity ADV Trends: ADV doubled to MYR4.3 billion in 2020 during the pandemic but normalized to pre-pandemic levels in 2022 before rising again in 2024.
• Derivative Volume: After a 7% drop in 2023, derivative trading volumes rebounded by 28% in 2024, driven by increased volatility in palm oil prices and the FBM KLCI index.
• Active Capital Management: Bursa has maintained a DPR of over 90% for normal dividends since its listing in 2005 and has issued multiple special dividends.

Sensitivity Analysis and Swing Factors

Maybank Investment Bank conducted a sensitivity analysis, noting that every MYR0.1 billion deviation in equity ADV could impact FY25 net profit by MYR8 million (3%). The key factors influencing Bursa’s performance include:

• Upside Drivers: Higher-than-expected equity trading activities, increased palm oil price volatility, and strong derivative market performance.
• Downside Risks: Reduced liquidity, declining foreign fund participation (19.7% market share as of December 2024), and weaker derivative market activities.

Analyst Recommendation

Maybank Investment Bank has maintained a “HOLD” recommendation for Bursa Malaysia, reflecting the balanced outlook of potential growth in non-trading revenues and IPO activities against the backdrop of a cautious trading environment. The revised target price of MYR8.35 represents a modest upside from the current share price of MYR8.47.