BURSA MALAYSIA BHD

RHB Research expects Bursa Malaysia’s trading volumes to continue remaining robust ahead of the upcoming general election, following the pick-up in its securities average daily value (SADV) to RM2.7bil in the first quarter.

The research house, which retained its “buy” call on the counter, noted that the SADV, which was 14% higher quarter-on-quarter and 16% up yearon-year, was positive for Bursa Malaysia’s earnings.

This, it said, was in line with its 2018 forecast of RM2.7bil.

“We believe trading volumes are likely to continue remaining robust ahead of the coming 14th general election (GE14),” the research house said.

It added that it expected the SADV to rise further in 2019 to RM2.8bil.

One of the contributing factors to this, it said, was the upcoming establishment of a stock market trading link between Bursa Malaysia and the Singapore stock exchange (SGX), which should help improve trading liquidity further.

RHB Research noted that if the sadv were to strengthen further, Bursa Malaysia could have a higher fair value.

For example, it said, if 2018 SADV were to be 20% higher at RM3.24bil, the company’s fair value could rise to a hypothetical RM10, all other factors being constant.

Factoring in the recent one-for-two bonus share issue, the research house raised its target price by 5% to RM8.50 from RM8.13, representing a 12% upside.

It added that its 2018 dividend forecast of 30 sen gives a dividend yield of 4%, which is close to the 10-year sovereign bond yield of 4.04%.

“Note that we do not expect the 2017 special dividend of 15 sen – which was based on the pre-bonus number of shares – to be repeated,” it said.