Bursa earnings to rise

Absence of prosperity tax to boost yearly results

PETALING JAYA: Bursa Malaysia is expected to register an earnings turnaround in the financial year ending Dec 31, 2023 (FY23), following a lacklustre performance in FY22.

This is in part due to the absence of the oneoff prosperity tax, or Cukai Makmur, that the government had imposed on companies with a chargeable income of more than Rm100mil for the 2022 assessment year.

According to CGS-CIMB Research, Bursa Malaysia’s net profit is projected to expand 5.5% year-on-year (y-o-y) in FY23 after shrinking 36.35% (y-o-y) in FY22.

At the topline, the brokerage is projecting a decent growth of 3.6% in equity income on the back of a 4.8% increase in the equity average daily trading volume and a 5.7% growth in derivative income in FY23.

CGS-CIMB Research has reiterated its “hold” call on Bursa Malaysia, with an unchanged target price of RM6.60 based on the five-year historical price-earnings (P/E) ratio of 21.5 times against the estimated earnings for FY24.

“We believe that its expected FY23 net profit growth would have been priced in, as its FY24 P/E of 21.9 times is above its five-year historical average. The stock price should be supported by a decent dividend yield of 3.9% for FY23,” the brokerage explained the reason for its “hold” call on Bursa Malaysia.

Meanwhile, TA Research and MIDF Research appeared more upbeat on Bursa Malaysia’s share performance over the next 12 months, with both recommending a “buy” call on the counter.

TA Research raised its target price for Bursa Malaysia to RM7.20 from RM6.55 previously, based on an implied FY23 P/E of around 21.6 times, while MIDF Research revised its target price for the stock exchange regulator to RM7.30 from RM7.60 due to its earnings estimate revision for the counter.

Bursa Malaysia posted a net profit of Rm226.6mil for FY22, down 36.2% from the Rm355.3mil in FY21. The decrease was due to a lower overall trading revenue of Rm377.1mil in FY22, down 30.7% y-o-y, while total operating expenses increased 1.4% y-o-y to Rm292.7mil.

Analysts reckoned the company’s results for FY22 were largely in line with market expectations.

Bursa Malaysia’s targets for FY23 included a pre-tax profit of between Rm295mil and Rm326mil, supported by non-trading revenue growth of 5%-7% y-o-y; and 39 initial public offerings with combined market capitalisation of Rm10bil.

“We believe the pre-tax profit target is reasonable and within our projections, as we foresee an improvement in capital market activities and the launch of several new innovative products and services in the pipeline, such as the Bursa Gold Dinar and Commercialisation of new debt fundraising solutions for small and medium enterprises, to support earnings growth,” TA Research said.

MIDF Research concurred, saying, “We believe that these targets are achievable given that they are very conservative, especially on the pre-tax profit target, given that external factors might be in favour to trading activities this year.

“However, operating expenditure growth is expected to be mid-single digit as it will be investing to support these targets.”

TA Research said efforts by the regulator to drive the environmental, social and governance focus among listed companies could improve transparency in terms of reporting. “We foresee these efforts to strengthen the ecosystem, grow the market vibrancy and help attract more foreign participation,” it said.

“We believe that these targets are achievable given that they are very conservative.” Midf research