R e g i o n a l M o r n i n g N o t e s Wednesday, 28 April 2021

COMPANY RESULTS HOLD

Bursa Malaysia (BURSA MK) (Maintained)
1Q21: Earnings Better Than Expected; Robust ADV Priced In Share Price RM8.49
Target Price RM9.10
Bursa reported better-than-expected earnings in 1Q21 on the back of robust securities
ADV growth. We think the current risk-to-reward is balanced with the stock trading at - Upside +7.2%
1SD to historical mean PE on record 2021 ADV assumptions. As such, despite our
earnings upgrade to factor in the robust near-term ADV assumptions, we are
maintaining our HOLD rating and target price of RM9.10. Entry price: RM8.20. COMPANY DESCRIPTION
Bursa is a fully integrated stock exchange
1Q21 RESULTS offering a wide range of exchange-related
Year to 31 Dec (RMm) 1Q21 4Q20 qoq % chg 1Q20 yoy % chg services. It also offers information services
Total Revenue 232.3 230.7 0.7 150.8 54.1 related to the Malaysian securities market
EBITDA 168.1 144.5 16.3 92.8 81.1 STOCK DATA
EBITDA margin (%) 73.7% 64.3% 9.5 63.8% 9.9
GICS sector Financials
PBT 162.8 139.2 17.0 87.1 86.8
Bloomberg ticker: BURSA MK
Net Profit 121.4 104.9 15.8 64.7 87.5
EPS (sen) 15.0 13.0 15.8 8.0 87.6 Shares issued (m): 809.0
Average daily trading value (RMb) 5.17 4.98 3.8 2.58 100.4 Market cap (RMm): 6,870.9
Average daily trading volume (b ) 8.60 9.13 (5.8) 3.50 145.7 Market cap (US$m): 1,676.8
Source: Bursa, UOB Kay Hian 3-mth avg daily t'over (US$m): 5.5
RESULTS Price Performance (%)
• Above expectations. Bursa Malaysia (Bursa) reported 1Q21 net profit of RM121.4m 52-week high/low RM10.60/RM4.42
(87.5% yoy, 15.8% qoq). Earnings were above our and consensus estimates with 1Q21 1mth 3mth 6mth 1yr YTD
earnings representing 37% and 40% of our and consensus full-year forecasts respectively. (5.1) (6.7) 0.5 49.0 3.2
The positive deviation was due to stronger-than-expected trading revenue, buoyed by
Major Shareholders %
stronger-than-expected 1Q21 ADV of RM5.03b vs our full-year 2020 forecast of RM3.60b.
Capital Market Development Fund 18.6
• Robust ADV underpins record-high earnings. Bursa reported a near record-high 1Q21 Kumpulan Wang Persaraan 11.2
earnings, largely driven by a 93% yoy increase in securities trading revenue as ADV rose EPF 6.7
100.3% yoy to RM5.03b. However, earnings were partially tempered by a 16% yoy
FY21 NAV/Share (RM) 1.14
contraction in derivative trading revenue on lower FCPO futures contract volumes.
FY21 Net Cash/Share (RM) 0.39
• On a qoq comparison, earnings rose 15.8% qoq largely driven by lower opex (-50% qoq),
partially due to 4Q20’s lumpy IT and other non-staff expenses. Revenue was flattish as a 5% PRICE CHART
qoq increase in securities market ADV was offset by a lower number of trading days and
(lcy) BU R SA MAL AY SIA BHD BU R SA MALAY SIA BHD /FBMK LC I IN DE X (%)
weaker listing and issuer fee income. 11 190
180
10
170
160
9
150

KEY FINANCIALS 8 140

130
Year to 31 Dec (RMm) 2019 2020 2021F 2022F 2023F 7
120

Net turnover 502 799 808 704 644 6

110
100
EBITDA 277 529 529 411 336 5 90
Operating profit 256 507 511 393 318 15
Volume (m)
Net profit (rep./act.) 183 378 377 290 234 10

5
Net profit (adj.) 183 378 377 290 234
0
EPS (sen) 22.6 46.7 46.6 35.9 28.9 Apr 20 Jun 20 Aug 20 Oct 20 Dec 20 Feb 21

PE (x) 37.6 18.2 18.2 23.7 29.4

P/B (x) 9.0 7.6 7.5 7.3 7.3 Source: Bloomberg
EV/EBITDA (x) 23.7 12.4 12.4 16.0 19.5
ANALYST(S)
Dividend yield (%) 2.4 6.0 5.2 4.0 3.2
Net margin (%) 36.3 47.3 46.6 41.2 36.3 Keith Wee Teck Keong
Net debt/(cash) to equity (%) (32.0) (47.8) (34.5) (37.1) (39.4) +603 2147 1981
Interest cover (x) 518.9 982.5 n.a. n.a. n.a. keithwee@uobkayhian.com
ROE (%) 22.3 45.5 41.4 31.3 24.9
Consensus net profit - - 335 302 296
UOBKH/Consensus (x) - - 1.13 0.96 0.79
Source: Bursa, Bloomberg, UOB Kay Hian

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STOCK IMPACT PE BAND

• Risk-to-reward is balanced. Given the very high-base effect of 2020 and 2021 ADV of
RM4.2b and RM4.3b (f), earnings would be largely flattish in 2021 before normalising
downwards from 2022 onwards. As such, we believe that the stock’s current risk-to-reward is
balanced, which prompts us to maintain our HOLD recommendation despite our earnings
upgrade on a stronger-than-expected near-term ADV outlook.
• Raising ADV assumptions. We raise our 2021 and 2022 ADV assumptions to RM4.3b and
RM3.3b respectively from RM3.6b and RM3.0b as trading volumes continues to surprise on
the upside (4M21 ADV: RM4.7b).
BURSA: SHARE PRICE VS ADV

Source: Bursa, UOB Kay Hian

TRADING VALUE

Source: Bloomberg, UOB Kay Hian

EARNINGS REVISION/RISK
Source: Bursa, UOB Kay Hian
• Factoring in higher ADV assumptions for 2021 and 2022, we raise our earnings by 14% and
7% respectively. KEY ASSUMPTIONS
2021F 2022F 2023F
VALUATION/RECOMMENDATION Average Daily Value of Equities (RMb) 4.30 3.30 2.50
Futures Contract (m) 19.1 19.6 20.1
• Maintain HOLD with an unchanged target price of RM9.10. The stock is currently trading Dividend payout ratio (%) 95.0 95.0 95.0
at -1SD to its historical 10-year mean PE on near-record earnings assumptions for 2021. We Source: UOB Kay Hian
think that this fair as 2021 earnings assumptions are based on extremely lofty ADV
assumptions of RM4.3b, which are unlikely to be sustainable over the medium term.
Consequently, we are maintaining our HOLD recommendation and target price of RM9.10
based on 22x (-0.5SD below historical mean) 2021 and 2022 blended average earnings
forecast. By capturing the average of the two years’ earnings forecasts into our valuation, we
believe that we would be striking a balance in acknowledging the robust near-term ADV
outlook and a more realistic downward normalisation in ADV in 2022.

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PROFIT & LOSS BALANCE SHEET

Year to 31 Dec (RMm) 2020 2021F 2022F 2023F Year to 31 Dec (RMm) 2020 2021F 2022F 2023F
Net turnover 799.0 808.2 704.3 643.6 Fixed assets 197.4 229.4 261.4 293.4
EBITDA 528.6 528.9 411.1 335.7 Other LT assets 263.4 317.8 278.8 290.8
Deprec. & amort. 21.4 18.0 18.0 18.0 Cash/ST investment 439.0 325.2 354.4 380.5
EBIT 507.2 510.9 393.1 317.7 Other current assets 2,333.1 2,314.9 2,284.2 2,258.4
Net interest income/(expense) (0.5) 0.0 0.0 0.0 Total assets 3,232.9 3,187.3 3,178.9 3,223.2
Pre-tax profit 506.6 510.9 393.1 317.7 ST debt 0.5 0.0 0.0 0.0
Tax (128.9) (129.8) (99.9) (80.7) Other current liabilities 2,303.8 2,202.5 2,149.9 2,153.0
Minorities 0.0 (4.2) (3.2) (3.2) LT debt 7.5 7.5 7.5 7.5
Net profit 377.7 376.9 290.1 233.8 Other LT liabilities 20.3 53.5 80.0 106.3
Net profit (adj.) 377.7 376.9 290.1 233.8 Shareholders' equity 900.8 919.6 934.1 945.8
Minority interest 0.0 4.2 7.4 10.6
Total liabilities & equity 3,232.9 3,187.3 3,178.9 3,223.2

CASH FLOW KEY METRICS

Year to 31 Dec (RMm) 2020 2021F 2022F 2023F Year to 31 Dec (%) 2020 2021F 2022F 2023F
Operating 417.2 446.3 352.8 296.3 Profitability
Pre-tax profit 377.7 381.1 293.3 237.0 EBITDA margin 66.2 65.4 58.4 52.2
Deprec. & amort. 21.8 18.0 18.0 18.0 Pre-tax margin 63.4 63.2 55.8 49.4
Working capital changes (1.7) 14.0 15.0 15.0 Net margin 47.3 46.6 41.2 36.3
Non-cash items 19.4 33.2 26.5 26.3 ROA 13.6 11.7 9.1 7.3
Investing (90.5) (50.0) (50.0) (50.0) ROE 45.5 41.4 31.3 24.9
Capex (maintenance) (40.4) (50.0) (50.0) (50.0)
Investments (149.3) 0.0 0.0 0.0 Growth
Others 99.2 0.0 0.0 0.0 Turnover 59.0 1.2 (12.8) (8.6)
Financing (225.6) (358.6) (275.6) (222.1) EBITDA 90.8 0.1 (22.3) (18.3)
Dividend payments (177.8) (358.1) (275.6) (222.1) Pre-tax profit 100.7 0.8 (23.1) (19.2)
Issue of shares 0.0 0.0 0.0 0.0 Net profit 106.9 (0.2) (23.0) (19.4)
Loan repayment 0.0 (0.5) 0.0 0.0 Net profit (adj.) 106.9 (0.2) (23.0) (19.4)
Others/interest paid (47.9) 0.0 0.0 0.0 EPS 106.9 (0.2) (23.0) (19.4)
Net cash inflow (outflow) 101.1 37.7 27.2 24.2
Beginning cash & cash equivalent 185.9 286.4 325.2 354.4 Leverage
Ending cash & cash equivalent 287.0 324.2 352.4 378.5 Debt to total capital 0.9 0.8 0.8 0.8
Debt to equity 0.9 0.8 0.8 0.8
Net debt/(cash) to equity (47.8) (34.5) (37.1) (39.4)
Interest cover (x) n.a. n.a. n.a. n.a.

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