CIMB Equities Research is downgrading Bursa Malaysia shares from a Trading Buy to Hold and prefer AMMB for exposure to the financial sector after the stock exchange operator’s results which were announced last Friday, July 16.
Bursa’s 1H10 net profit (+10.1% YoY) was only 37%-42% of CIMB Research’s full-year forecast and consensus. The main culprit was velocity which came in at 31% versus its our full year projection of 38%. Overall, equity trading revenue climbed 13.4% YoY but derivative revenue fell 17.1% YoY in 1H10.
“Factoring in lower velocity of 35%, it pared down its FY10-12 EPS forecasts by about 6.6%,” said the research house in its note on Monday, July 19.
“Our target price falls from RM10.20 to RM7.80 as we also reduce our target FY11 P/E from 33 times to 27 times given that the group’s push to improve its operations and raise velocity and derivative income will take time to materialize,” it said .
CIMB Research said the weaker underlying trends in the near term are reflected by the poor velocity of only 27% in 2Q10 and the YoY drop in derivative income in the past two quarters. On this score, it downgraded the stock from a Trading Buy to Hold and prefer AMMB for exposure to the financial sector.
Written by CIMB Equities Research
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