Bursa Malaysia Berhad TP - Results Within Expectations

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1. RESULTS UPDATE TA Securities Tuesday , July 26, 2016 FBM KLCI: 1,668.26 Sector: Finance A Member of the TA Group MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Bursa Malaysia Berhad TP: RM 9.30 (+4.6%) 1HFY16 Results Within Expectations Last traded: RM 8.89 HOLD THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* TA Research Team Coverage Tel: +603-2167 9610 liwong@ta.com.my Review Results are in line with expectations, accounting for 50% and 48% of ours and consensus full year estimates. Posting 1HFY16 net profit of RM99.4mn, this is a slight 2.9% YoY improvement from a year ago. PBT climbed by 2.7% YoY on the back of a 3.8% increase in total revenue. Other income, which comprises interest income from investments and dividend income surged 11.8% while operating revenue widened by some 3.3% YoY. Muting the increase in revenue was the 6.6% jump in other operating expenses, which was due mostly to advisory fees. Annualised ROE stood at 25% - unchanged from a year ago. Sequentially, net profit eased for the second straight quarter this year. The 0.9% QoQ decrease was underpinned by lower revenue (-3.1% YoY). Compared to a year ago, operating revenue climbed on the back of better performance from the Derivatives Market (+6.1% YoY), Bursa Suq Al-Sila (BSAS) (+1.3% YoY) trading revenue, listing and issuer services revenue (+1.2% YoY) and market data revenue (+1.7% YoY). Securities trading revenue, which makes up ~45% of total operating revenue, sank by 3.3% YoY. Trading participation by foreign institutions stood at 28% in 1H2016 (2015: 27%). Comparing between trading participation by retailers and institutions, retail investors made up only 22% of total trading participation vs. 23% in 2015. Average daily value (ADV) dipped again to RM1,910mn vs. RM1,994mn in 1H2015. Similarly, market capitalisation decreased to RM1,654.08bn from RM1,706.64bn a year ago while trading velocity softened to 28% (1H2015: 29%). The improvement in derivatives trading revenue was due to the higher number of contracts and open interest position. Trading of the FBMKLCI Futures was robust, with average daily contracts (ADC) accelerating by close to 16% YoY while trading of crude palm oil futures broadened by some 6.3% YoY. Combined, ADC traded grew to 59.8k contracts compared to 55.3k in 1H2015. Of this, 79% of total trades were in crude palm oil futures and 20% in FBMKLCI futures. By participation, foreign institutions traded 59% and 33% of the FLKI and FCPO. On the Islamic market trading activity front, the Bursa Suq Al-Sila’ (BSAS) trading revenue accounts for 3.5% of total operating revenue. While this segment continues to be driven by higher conversion of deposits to Murabaha along with growing interest in Tenor Based Pricing, the pace of revenue acceleration has softened. Meanwhile, ADV advanced on the back of an increase in the number of trading participants from 106 in 1H2015 to 116. The number of sukuk listed stood little changed at 23 (1H2015: 21). Meanwhile, market capitalization of Shari’ah compliant stocks advanced to RM1,034mn (1H2015: RM1,023mn). 0 Share Information 7 Bloomberg Code BURSA MK 1818 Main Market 536.3 4767.7 0.50 9.00/7.48 483.8 63.2 0.6 Stock Code Listing Share Cap (mn) Market Cap (RMmn) Par Value 52-wk Hi/Lo (RM) 12-mth Avg Daily Vol ('000 shrs) Estimated Free Float (%) Beta Major Shareholders (%) KWAP - 19.7% Capital Market DVLP Fund - 18.7% EPF - 6.9% Forecast Revision Forecast Revision (%) Net profit (RMm) Consensus TA's / Consensus (%) Previous Rating FY16e FY17e 199.1 223.4 208.8 225.0 95.4 99.3 Hold (maintained) Financial Indicators FY16e Net cash 23.0 1.6 5.5 34.5 3.9 FY17e Net cash 23.5 1.8 5.0 34.5 3.9 vs TA vs Consensus % of FY 50% 48% Within Within Share Performance (%) Price Change 1 mth 3 mth 6 mth 12 mth BURSA 3.9 5.7 5.8 10.0 FBM KLCI 0.9 (0.3) 0.0 (3.2) Net gearing (%) ROE (%) NTA/Share (RM) Price/ NTA (x) Dividend (sen) Div. yield (%) Scorecard (12-Mth) Share Price relative to the FBM KLCI Impact No change to our earnings estimates. Source: Bloomberg Page 1 of 3 www.taonline.com.my
2. TA Securities 26-Jul-16 A Member of the TA Group Outlook The outflow of foreign funds continue to dampen the securities market . Total net foreign outflow between April and June 2016 amounted to RM5.6bn, erasing net inflows of RM5.5bn recorded in 1Q2016. As a result, contribution from securities trading is getting smaller. Contributions from the segment has fallen to 45% of total operating revenue from 48% a year ago. We continue to foresee softer trading activities for the remaining part of the year as sentiments remain depressed by broad macro uncertainties. The volatility in commodity prices and the FBM KLCI should continue to help spur activities in the derivatives market. On the Islamic capital front, Bursa noted that transactions on Bursa Suq Al-Sila’ are expected to be sustained with the demand for Murabaha contracts to aid liquidity management. However, we note that the pace of growth for this segment will continue to decline as the boost from the conversion of bank deposits to Murabaha eases. Deposit growth in the banking system is also envisaged to remain lackluster. Valuation Bursa’s TP is maintained at RM9.30. The TP is based on an implied FY17 PER of 20x. Our assumption is based on the group’s 3-year average payout in excess of 90%. Including decent dividend yields of between 4-5% (excluding special dividends). HOLD reiterated on BURSA. Key potential upside risks to our TP include: (1) a compression in risk premiums, (2) further pick-up in velocity, (3) stronger-than-expected improvement in the derivatives market, (4) improvement in retail sentiments, and (5) return of foreign investors in full swing. Earnings Summary FYE Dec Revenue EBITDA EBITDA Margins (%) Pretax profit Net profit EPS (Sen) EPS Growth (%) PER (x) Gross Div (sen) Div Yield (%) ROE (%) 2014 503.8 297.0 59.0 271.8 198.2 37.1 14.3 24.0 54.0 6.1 26.0 2QFY16 Results Analysis (RMmn) FYE 31 Dec 2Q FY15 2015 518.5 302.5 58.3 278.8 198.6 37.2 (0.0) 23.9 34.5 3.9 26.0 2016F 526.7 303.6 57.6 272.4 199.1 37.3 0.3 23.9 34.5 3.9 23.0 2017F 567.4 332.6 58.6 304.3 223.4 41.8 12.2 21.3 34.5 3.9 23.5 2018F 611.6 360.3 58.9 334.7 246.5 46.1 10.3 19.3 34.5 3.9 23.3 1Q FY16 2Q FY16 QOQ YOY YTD FY15 YTD FY16 YOY 120.7 126.1 122.2 (3.1) 1.3 240.5 248.4 3.3 Other income 6.4 7.8 7.5 (4.3) 17.5 13.7 15.3 11.8 Total revenue 127.0 133.9 129.7 (3.1) 2.1 254.1 263.7 3.8 Staff cost (32.3) (33.3) (33.3) (0.0) 3.1 (63.9) (66.6) 4.2 Depreciation (6.0) (6.1) (6.0) (0.7) 0.2 (11.7) (12.1) 3.4 Other operating expenses (19.2) (24.0) (21.0) (12.6) 9.1 (42.2) (45.0) 6.6 Profit before tax 69.5 70.6 69.4 (1.6) (0.1) 136.3 140.0 2.7 Taxation (18.4) (18.0) (17.7) (1.7) (4.0) (36.1) (35.7) (1.2) Profit after tax 51.0 52.6 51.7 (1.6) 1.4 100.2 104.3 4.1 Minority interests 1.6 2.7 2.3 (14.7) 45.4 3.7 4.9 35.2 Net profit EPS 49.5 9.3 49.9 9.3 49.5 9.3 (0.9) (0.9) (0.0) (0.0) 96.5 18.1 99.4 18.6 2.9 2.9 Operating revenue Page 2 of 3
3. TA Securities 26-Jul-16 A Member of the TA Group ( T HI S P AGE I S I NT E N T I ON AL L Y L E FT B L ANK) Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD(14948-M) MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan – Head of Research Page 3 of 3