Business

Saturday July 18, 2009

Analysts: Bursa set to double profit in Q2

By RACHAEL KAM


PETALING JAYA: Bursa Malaysia Bhd is expected to double its net profit to over RM30mil in the second quarter from RM15.5mil in the first quarter, given the strong market trading activities in the past few months, analysts say.

The anticipated strong second-quarter performance has prompted analysts to lift their earnings forecasts for the local stock exchange operator for this year and beyond.

Bursa Malaysia is scheduled to release its financial results for the second quarter ended June 30 on Monday.

HwangDBS Vickers Research said the daily trading volume and value on the local bourse in the second quarter soared to 1.63 billion shares and RM1.49bil respectively.

In the first quarter, the average daily trading volume was 410 million shares worth RM620mil.

In addition, the average daily volume for derivatives surged 23% quarter-on-quarter and 40% year-on-year, driven by the uptrend in the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) and higher crude palm oil prices.

“As such, we expect Bursa to register a net profit of RM30mil to RM35mil in the second quarter compared with RM15.5mil in the first quarter and RM13.5mil in the fourth quarter 2008,” the brokerage said in a research note.

The renewed bullish sentiment on Bursa in the past several days was in tandem with gains in regional bourses following positive indications from the United States and major Asian economies.

The benchmark FBM KLCI touched a near 12-month high of 1,121.66 points on Friday, before closing up 12.02 points or 1.08% at 1,120.90.

“On the upside, resistance can be expected at 1,120 points, followed by 1,140 and 1,150, then on to the 1,200-point psychological level,” a technical analyst said, noting that initial support was seen at 1,100 points, then down to 1,083, 1,058 and 1,040.

HwangDBS noted that the year-to-date average trading volume was strong at 1.03 billion shares worth RM1.07bil, driven by upswing in the second quarter.

Hence, it has raised its daily volume assumptions of the local bourse to a range of 980 million to 1.12 billion shares for financial years 2009 to 2011, from 467 million to 515 million previously.

Daily value assumptions are raised to between RM990mil and RM1.15bil, from RM820mil to RM940mil previously.

“Consequently, we lifted FY09-FY11 earnings by 9% to 10%,” it said.

However, Bursa is currently trading at 29 times estimated FY10 earnings, which is expensive compared with 15 times at the Singapore Stock Exchange and 24 times at the Hong Kong Stock Exchange, according to HwangDBS.

The brokerage has reiterated its “fully valued” call on the stock but raised its target price to RM6.05 from RM5.40 previously, based on 25 times estimated FY10 earnings.

“Re-rating catalysts include sustainable trading volumes and values, and faster-than-expected revival of capital market activities,” it said.

Bursa Malaysia closed 5 sen or 0.7% lower yesterday at RM7.25, with 1.46 million shares traded.

Macquarie Research analyst Tay Chin Seng said in light of the recent surge in trading volumes for both securities and derivatives, the research house has raised Bursa’s earnings forecasts.

“We expect Bursa to achieve RM32.2mil net profits for the second quarter,” he said, adding that it had raised its forecast net profit by 39.2% to RM95.2mil for FY09.

Tay said although the outlook remained cautious, Macquarie had upgraded its recommendation on the stock to “neutral” from “underperform” and increased its 12-month target price to RM6.60 from RM4.38.

“In the near term, we do not expect any positive surprises unless trading volumes surprise,” Tay said in a research note.

Maybank Investment, which has maintained its “sell” call on Bursa, is anticipating the stock exchange operator’s second-quarter net profit to exceed RM30mil as 50% to 60% of Bursa’s operating revenue is derived from trading activities.

The research house also lifted Bursa’s net profit forecast by 23% for 2009 and 13% for 2010.

In view of the earnings upgrades, Maybank also raised its dividend per share (DPS) forecasts to 24 sen from 19.5 sen for 2009, and 29 sen from 25.5 sen for 2010, assuming a 90% payout.

“We expect a first interim DPS of 8 sen (net) to be declared in the second quarter 2009,” it said in a research note.

Although Maybank raised its equities average daily trading value forecast for 2009 to RM1.15bil from RM900mil, it expects trading to remain volatile in the second half of 2009 on more negative external economic and business news.


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