Stock Name: BURSA
Company Name: BURSA MALAYSIA BHD
Research House: MAYBANK
Bursa Malaysia Bhd
(April 20, RM8.11)
Maintain sell at RM7.93 with target price RM7.30: Net profit of RM40.5 million in 1Q11 (+44% year-on-year, +36% quarter-on-quarter) made up 30% of our full-year forecast and 26% of consensus. We make no change to our earnings forecasts as we expect market activities to taper off in 2Q11.
We maintain our 'sell' call as the stock remains overvalued, trading on 31 times current year earnings, significantly above its larger-sized peers and recent M&A valuations. Our target price is based on sum-of-parts, with 25 times price earnings ratio target on 2011 earnings plus surplus cash.
Equities average daily value (ADV) rose 46% y-o-y and 12% q-o-q to RM2.23 billion (1Q10: RM1.53 billion, 4Q10: RM2 billion) with velocity rising a sharp seven percentage points (ppts) y-o-y and five ppts q-o-q to 42%. Equities ADV and velocity in 1Q11 was the highest since 3Q07 (RM2.56 billion, 50%).
Derivative contracts traded expanded 54% y-o-y and 26% q-o-q to 2.17 million, a record quarter.
Consequently, trading revenue from equities and derivatives rose to 54% and 12% of total revenue (1Q10: 49%, 10%). Earnings before interest and tax margin rose 5.1ppts y-o-y and 4.2ppts q-o-q.
Expect a slower 2Q. Equities ADV was the highest in January 2011 (RM2.67 billion), but has been tapering off (February: RM2.26 billion, March: RM1.84 billion) to RM1.92 billion in the first 13 trading days of April. Foreign selling has been prevalent in the emerging markets, while regional interest rate hikes also contributed to the weakness in equities.
The situation is expected to persist into 2Q with equities volume tapering off. Our house view is for a stronger Malaysian equities market in 2H11 supported by domestic economic strength, the Economic Transformation Programme implementation, and renewed expectations for a general election.
We make no change to our forecasts. Our earnings model incorporates an equities ADV forecast of RM1.84 billion for 2011 (2010: RM1.57 billion), rising to RM2.11 billion in 2012, which would be supported by rising trading liquidity from GLIC/Fs' PLC share divestment programmes and new listings.
Longer-term earnings upside potential could come from the derivatives business although the impact could be muted in the near term. We forecast a 19% growth in net profit for 2011 and another 19% in 2012. ' Maybank IB Research, April 20
This article appeared in The Edge Financial Daily, April 21, 2011.
Company Name: BURSA MALAYSIA BHD
Research House: MAYBANK
Bursa Malaysia Bhd
(April 20, RM8.11)
Maintain sell at RM7.93 with target price RM7.30: Net profit of RM40.5 million in 1Q11 (+44% year-on-year, +36% quarter-on-quarter) made up 30% of our full-year forecast and 26% of consensus. We make no change to our earnings forecasts as we expect market activities to taper off in 2Q11.
We maintain our 'sell' call as the stock remains overvalued, trading on 31 times current year earnings, significantly above its larger-sized peers and recent M&A valuations. Our target price is based on sum-of-parts, with 25 times price earnings ratio target on 2011 earnings plus surplus cash.
Equities average daily value (ADV) rose 46% y-o-y and 12% q-o-q to RM2.23 billion (1Q10: RM1.53 billion, 4Q10: RM2 billion) with velocity rising a sharp seven percentage points (ppts) y-o-y and five ppts q-o-q to 42%. Equities ADV and velocity in 1Q11 was the highest since 3Q07 (RM2.56 billion, 50%).
Derivative contracts traded expanded 54% y-o-y and 26% q-o-q to 2.17 million, a record quarter.
Consequently, trading revenue from equities and derivatives rose to 54% and 12% of total revenue (1Q10: 49%, 10%). Earnings before interest and tax margin rose 5.1ppts y-o-y and 4.2ppts q-o-q.
Expect a slower 2Q. Equities ADV was the highest in January 2011 (RM2.67 billion), but has been tapering off (February: RM2.26 billion, March: RM1.84 billion) to RM1.92 billion in the first 13 trading days of April. Foreign selling has been prevalent in the emerging markets, while regional interest rate hikes also contributed to the weakness in equities.
The situation is expected to persist into 2Q with equities volume tapering off. Our house view is for a stronger Malaysian equities market in 2H11 supported by domestic economic strength, the Economic Transformation Programme implementation, and renewed expectations for a general election.
We make no change to our forecasts. Our earnings model incorporates an equities ADV forecast of RM1.84 billion for 2011 (2010: RM1.57 billion), rising to RM2.11 billion in 2012, which would be supported by rising trading liquidity from GLIC/Fs' PLC share divestment programmes and new listings.
Longer-term earnings upside potential could come from the derivatives business although the impact could be muted in the near term. We forecast a 19% growth in net profit for 2011 and another 19% in 2012. ' Maybank IB Research, April 20
This article appeared in The Edge Financial Daily, April 21, 2011.
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