Bursa dragged by 2QFY22 But Expected To Rebound

The weakness in trading activities in 1HFY22 is due to volatility caused by US Fed’s hawkish stance and geopolitical issues

Bursa dragged by 2QFY22 But Expected To Rebound

Bursa saw its 1HFY22 earnings declined -39.4%yoy. This was below analyst expectations coming in at 42.4% of our FY22 estimate. The variance was due to weaker than expected 2QFY22 revenues, says MIDF.

Total revenue in 1HFY22 fell -26.0%yoy driven by lower revenue in 2QFY22 which fell -8.1%qoq. This was due to lower ADV for OMT and DBT which fell - 16.8%qoq to RM2.23b. Trading velocity was also lower by -6ppt to 30%.

The decline in trading revenue in 1HFY22 was moderated by growth in other segments. Derivatives trading, Bursa Suq Al-Sila, Market Data and Member Services & Connectivity revenues grew +6.2%yoy, +14.4%yoy, +18.3%yoy and +14.9%yoy respectively. Meanwhile, listing revenue was down only by -1.1%yoy.

OPEX continue to fall

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OPEX fell by -1.8%yoy to RM143.5m in 1HFY22. This was due to lower manpower cost which declined by - 4.9%yoy to RM78.0m. In terms of the trend, it seems that OPEX trended downwards as 2QFY22 OPEX fell -2.5%qoq to RM70.8m.

"We revise our FY22/FY23/FY24 earnings downwards by -5.0%/-7.5%/-5.2% to take into account of the weakness in 2QFY22," says the analyst firm.

"We have seen the weakness in trading activities in 1HFY22 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 and the expectation that the US Fed will reduce the pace of its hike. This will improve sentiment and market valuation going forward. Furthermore, we have seen interest from foreign investors starting to return this year.

"We believe the recent share price decline means that the stock is currently undervalued. Therefore, we are maintaining our BUY call on the stock. However, we revised our TP to RM7.60 (from RM7.45) as we rollover our valuation to FY23. We peg FY23 EPS to PER of 20x," it says.