Optimistic outlook for Bursa on new products, tools

PETALING JAYA: A more vibrant 2024 is foreseen as Bursa Malaysia Bhd unveiled new investment products and tools to broaden investor engagement and mitigate the decline in operating income.

TA Research said in a note that the launch earlier this month of the Bursa Gold Dinar app, focusing on gold as an investment product, holds promise for generating new revenue streams and diversifying Bursa’s offerings.

Additionally, Bursa is actively moving forward with the launch of a currency-futures product.

“Our optimism is further buoyed by the Bursa Carbon Exchange, introduced in September 2023, which has initiated trading in carbon credits.

“The forthcoming inclusion of Renewable Energy Certificates (RECs) by the third quarter of 2024 adds another layer of potential growth.

“Beyond facilitating companies in attaining net-zero targets through the trading of carbon credits and RECs, we perceive this initiative as a catalyst capable of bolstering foreign participation in the market.

“This strategic move not only aligns with evolving sustainability trends but also positions Bursa Malaysia as a key player in fostering environmentally conscious investment opportunities,” the bourse said in a statement.

TA Research pointed out that Bursa’s failure to meet its initial public offering (IPO) target of 39 companies in 2023 may pose a potential challenge to the stock exchange operator’s listing and issuer services fees.

Bursa saw 32 IPOs in 2023. As a result, the revenue from listing and issuer services fees declined by 8.3% year-on-year in the first nine months of 2023 (9M23).

Nevertheless, TA Research anticipates compensatory growth from various non-trading revenue segments.

“These segments include depository services, the data business, member services and connectivity as well as income derived from conferences and exhibitions,” the research house said.

Looking ahead to the fourth quarter (4Q) results, TA Research said Bursa is likely to deliver a predominantly stable sequential performance.

However, there is a potential downside risk to its full-year forecast, stemming from the absence of a notable acceleration in trading activity during 4Q and the possibility of softer-than-expected contributions from the non-trading revenue segment.

“We are maintaining our current earnings estimates for financial year 2023 (FY23) while awaiting the impending release of Bursa’s 4Q results.

“The 9M23 performance indicates that Bursa is progressing in line with its pre-tax profit target range of RM295mil to RM326mil.

“Furthermore, non-trading revenue is showing signs of strengthening, with projected year-on-year growth of 5% to 7% as guided in 2023.

“That said, we believe that Bursa is well-positioned to sustain its appealing dividend payout, exceeding 90% in FY23,” stated the research house.

TA Research raised its target price for Bursa to RM8.10 per share from RM7.30 previously. It also maintained its “buy” call on the stock.

“We note that Bursa is trading within the average regional peers’ price-to-earnings ratio of 22 times,” it added.