HwangDBS Vickers Research (HDBSVR) expects Bursa Malaysia, which will announce its 2Q earnings on Friday, July 16, to be weak, dragged by lower turnover value, volume and velocity.
The research house lowered FY10-12F earnings by 10-11% to reflect the softer market. Capital market activities were slower than expected.
"Valuation is demanding at 26x forward PE vs Asian market average of 24x and with no near term re-rating catalyst. Maintain Fully Valued and lowered TP to RM6.20," it said.
HDBSVR said Bursa's 2Q’s average daily turnover volume dropped 20% to 788m (vs 1Q’s 986m) while average daily turnover value fell 16% to RM1.16bn (vs 1Q’s RM1.38bn).
For 6M10, average daily value held up well at RM1.26bn (with the exception of June which fell 31% m-o-m to RM907m). This was in line with the research house's full year estimate of RM1.23bn.
"However, the average daily volume fell short of our estimates (6M10 at 883m vs ours at 1.03bn) due to lower trade volume by retailers and trading of large cap stocks by institutions. Derivatives trading remained soft as volume fell 6% q-o-q.
"Capital market activities in 2Q were slower than expected especially in the equity front with only RM688m raised from secondary listings and IPOs (vs 1Q’s RM5.1bn) despite having 9 IPOs in 2Q vs 3 in 1Q. However, debt market improved with RM15.3bn raised vs RM4.7bn in 1Q," it said.
HDBSVR said given the lackluster data, it expects weaker revenue from equity, derivatives and stable income. We estimate velocity of 29% and net profit of RM20-25m for 2Q.
"We lowered our earnings by 10-11% after reducing our average daily trading volume assumptions by 13% for FY10-12 to 896m, 986m and 1.1bn, respectively. Our FY10-12 average daily value assumptions remained unchanged at RM1.2bn, RM1.3bn and RM1.5bn, respectively.
"We have also cut our velocity assumption to 30% from 35% to reflect a softer market. Our TP is lowered to RM6.20 based on 23x FY11F EPS (previously 25x), the target multiple is derived from a correlation relationship with market velocity. Our TP is consistent with DDM valuation," it said.
Written by HwangDBS Vickers Research
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