23 April 2012
Maybank Research maintains its forecast of 11% growth in 2012 core net profit for Bursa, target price RM 7.00, Hold
WE maintain our forecast for an 11% growth in 2012 core net profit. The first quarter ended March 31, 2012 of RM40.8mil made up 25% of our full-year forecast.
Our target price is also unchanged as we continue to peg Bursa at a 20% discount to our target 25 times for Singapore Exchange Ltd.
The weaker operating revenue of -7% was off-set by higher other income and lower operating expenditure (opex), resulting in flattish net profit growth.
It reflects slower market activities where equities average daily trading value (ADV) came off 12% to MR1.97bil and velocity slowed 8 percentage points (ppts) to 34%.
The average daily contracts on derivatives also fell by 16% to 31,015 contracts in the first quarter due to lower volatility. However it rebounded on a sequential basis, up 30% quarter-on-quarter.
Almost the entire 18% pick-up in operating revenue flowed directly down to the bottomline, except for a 5% rise in opex.
The operating revenue rebound was due to higher equities ADV and velocity which resulted in trading revenue from equities rising 25%. It was also due to higher other operating revenue, which off-set slower trading revenue from derivatives as average daily contracts was down by 11% quarter-on-quarter.
The internal mid-term key performance indicators are unchanged with an average net profit growth of at least 20% per annum over 2011 to 2013, a growth in equities ADV to be at par with the leading regional listed exchanges, and 50,000 average daily contracts for derivatives by 2013, implying a 20% compounded annual growth rate from 2011.
We therefore forecast a more conservative 10% to 11% growth in 2012 to 2013 net profit with the major assumptions being RM1.82bil in equities ADV and velocity at 35% in 2012.