Wednesday, April 13, 2011

Bursa target price raised to RM9.90 - HwangDbs

Stock Name: BURSA
Research House: HWANGDBS

Bursa Malaysia Bhd
(April 12, RM8.04)
Maintain buy with target price raised to RM9.90 (from RM9.60)
: Trading interest in Bursa Malaysia has been resilient amid external challenges such as rising crude and commodity prices, political unrest in the Middle East and North Africa and nuclear crisis in Japan.

Average daily turnover volume in 1Q11surged 41% quarter-on-quarter to 1.7 billion shares, while average daily turnover value rose 25% q-o-q to RM2.1 billion. Velocity improved to 39% from 4Q10's 35%.

Kickers from the Economic Transformation Programme could further fuel positive sentiment in the stock market. The strong stock market activity was domestic-driven as foreign participation in equities remained flat at circa 24%.

The number of contracts traded in 1Q11 grew 32% q-o-q and 54% year-on-year. The migration of Bursa's derivatives trading platform to CME Globex (since September 2010), coupled with the recent commodity rally, seemed to attract foreign interest in derivatives products.

Foreign participation in FKLI and FCPO had risen to 37% and 30% respectively, against 33% and 25% in 2010. The CME Globex platform should promote greater visibility and spur stronger trading interest.

Given robust equities and derivatives turnover, we expect Bursa's 1Q11 results (due April 19) to be stronger with net profit at RM35 million to RM40 million.

As such, we raise FY11/13F assumptions for daily turnover volume to 1.3 billion to 1.6 billion (from 1.0 billion to 1.2 billion) and daily turnover value to RM1.8 billion to RM2.2 billion (from RM1.5 billion to RM1.8 billion).

We also raise operating costs to include higher technology and depreciation charges. All in, we nudge up FY11/13F net profit by 2% to 6% and our discount dividend model-based target price to RM9.90. ' HwangDBS Vickers Research, April 12

This article appeared in The Edge Financial Daily, April 13, 2011.

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