RHB Group's In-Depth Bursa Malaysia Report Reiterates "Buy" Rating

Bursa Malaysia, a pivotal player in the ASEAN region's financial landscape, has been at the forefront of capital formation since its inception in 1976 and subsequent listing in 2005. The exchange serves a diverse economic ecosystem, with over 900 companies across various sectors leveraging its platforms to raise capital. Its regulatory role ensures fair and orderly market operations, while its influence on ESG disclosures among listed companies is commendable.

RHB Group's report lauds Bursa Malaysia's financial performance, with a net profit of MYR 1.555 billion for 1H24, aligning with full-year forecasts. The company's market cap is valued at USD 1.711 billion, trading at MYR 9.80 per share. The report anticipates a continued upward trajectory, with the PBT target for FY24 revised to MYR 361-379 million, reflecting the robust performance of the securities market.

Securities Trading: For 2Q24, securities trading revenue was MYR 104.8 million, showing an 81.3% increase YoY and a 19.9% rise QoQ, closely tracking the significant 69% YoY growth in Securities Average Daily Value (SADV).

Derivatives Trading: Derivatives trading revenue slightly increased by 15.6% YoY to MYR 26.5 million, with a 4.5% QoQ growth, aligning with the 14% YoY increase in the Derivatives Average Daily Contracts (DADC).

BSAS (Back-End Systems and Ancillary Services): This segment contributed MYR 4.5 million in 2Q24, with a modest 6% YoY increase and a 5.4% QoQ growth.

Other Stable Revenue: The 'Other' category, which includes the market data business, demonstrated resilience with a 7.7% QoQ increase and an 8.9% YoY decrease, contributing MYR 121.5 million in 1H24. Notably, the market data business alone grew by 15% YoY in 1H24.

Total Operating Revenue: The sum of these segments resulted in an operating revenue of MYR 193.8 million for 2Q24, a substantial 39.6% YoY increase and a 7.3% QoQ growth, culminating in a 1H24 total of MYR 374.5 million, which represents a 29.3% YoY increase.

RHB Group assigns a "Buy" rating to Bursa Malaysia, with a target price of MYR 11.25, indicating a 15% upside. This valuation is supported by:- A forward P/E ratio of 26.5 times the FY25F EPS.

- A 6% ESG premium reflecting Bursa Malaysia's strong commitment to ESG practices.

- Consideration of the company's dividend payout ratio and the interim DPS of 18 sen.

- Growth prospects driven by a robust IPO pipeline and the sustained strength of the securities market.

- A conservative approach that accounts for potential risks and market uncertainties.

The report identifies potential risks, including geopolitical uncertainties and market reactions to events such as the Middle East conflict and the U.S. elections. However, it also notes the company's strong IPO pipeline and the potential for special dividends, should the optimal cash level of MYR 350 million be maintained.

RHB Group's report underscores Bursa Malaysia's position as a leading stock exchange with a solid financial foundation and a commendable commitment to ESG practices. The "Buy" rating reflects confidence in the company's future growth and its potential to deliver returns to investors.