BURSA (1818) - Bursa Malaysia - Commendable 4Q14 before tough 2015
Target RM8.05 (Stock Rating: HOLD)
At 104% of our and consensus forecasts, Bursa’s FY14 net profit was above expectations due to higher-than-expected equity income. However, net DPS of 54 sen for FY14 was in line with our estimate. After updating the FY14 numbers, our FY15-16 EPS forecasts rise by 1-4%. However, we cut our target price as we reduce our target CY16 P/E from 21.5x (3-year average) to 19.4x (10% discount to 3-year average) in view of our cautious stance on the equity market in 2015. For the same reason, we downgrade the stock from Add to Hold, despite the stronger-than-expected 4Q14 earnings. In 2015, we project slower equity income growth against a recovery in derivative income. We prefer RHB Capital for exposure to the financial services sector.
Strong showing in 4Q14
Bursa delivered fair earnings performance in 4Q14, which is the weakest quarter seasonally, with a 12.7% yoy rise in average daily trading value (ADTV) to RM1.9bn on the back of market velocity (MV) of 28% (vs. 25% in 4Q13). In 2014, ADTV advanced by 7% yoy to RM2.1bn but MV dwindled from 30% in 2013 to 29% in 2014. This helped the company achieve a 10% yoy increase in equity income to RM239.1m in 2014.
Marginal increase in derivative income
Bursa’s derivative income inched up by 1% yoy to RM70.6m. This was mainly due to the drop in 1H14 derivative income caused by lower guarantee and collateral management fees. On a positive note, the average number of daily contracts for the derivative market advanced by a strong 16% yoy to 50,650 in 2014. This underpins our positive view on derivative income growth in 2015.
Tougher time ahead for equity market
We downgrade Bursa from Add to Hold, premised on our cautious stance on the equity market. Our end-2015 KLCI target of 1,800 pts represents a mere 2.2% yoy increase. However, we are positive on the growth prospects of the derivative business.
Source: CIMB Daybreak - 30 January 2015
Target RM8.05 (Stock Rating: HOLD)
At 104% of our and consensus forecasts, Bursa’s FY14 net profit was above expectations due to higher-than-expected equity income. However, net DPS of 54 sen for FY14 was in line with our estimate. After updating the FY14 numbers, our FY15-16 EPS forecasts rise by 1-4%. However, we cut our target price as we reduce our target CY16 P/E from 21.5x (3-year average) to 19.4x (10% discount to 3-year average) in view of our cautious stance on the equity market in 2015. For the same reason, we downgrade the stock from Add to Hold, despite the stronger-than-expected 4Q14 earnings. In 2015, we project slower equity income growth against a recovery in derivative income. We prefer RHB Capital for exposure to the financial services sector.
Strong showing in 4Q14
Bursa delivered fair earnings performance in 4Q14, which is the weakest quarter seasonally, with a 12.7% yoy rise in average daily trading value (ADTV) to RM1.9bn on the back of market velocity (MV) of 28% (vs. 25% in 4Q13). In 2014, ADTV advanced by 7% yoy to RM2.1bn but MV dwindled from 30% in 2013 to 29% in 2014. This helped the company achieve a 10% yoy increase in equity income to RM239.1m in 2014.
Marginal increase in derivative income
Bursa’s derivative income inched up by 1% yoy to RM70.6m. This was mainly due to the drop in 1H14 derivative income caused by lower guarantee and collateral management fees. On a positive note, the average number of daily contracts for the derivative market advanced by a strong 16% yoy to 50,650 in 2014. This underpins our positive view on derivative income growth in 2015.
Tougher time ahead for equity market
We downgrade Bursa from Add to Hold, premised on our cautious stance on the equity market. Our end-2015 KLCI target of 1,800 pts represents a mere 2.2% yoy increase. However, we are positive on the growth prospects of the derivative business.
Source: CIMB Daybreak - 30 January 2015
