Bursa declares special dividend in 2Q

Bursa declares special dividend in 2Q
Business & Markets 2014
Written by Kenanga Research
Monday, 21 July 2014 09:47

Bursa Malaysia
(July 18, RM8.24)
Maintain outperform with target price of RM8.60: Bursa’s first half ended June 30 of financial year 2014 (1HFY14) net profit of RM92 million accounted for 50.6% of our forecast and 47.8% of consensus’ estimate.

Apart from an interim dividend of 16 sen per share, Bursa also declared an additional special dividend of 20 sen per share. The declared dividend was on par with that of the previous corresponding period. However, the total dividend declared was above our expectation of 16 sen.

Bursa’s operating revenue grew 2.3% but net profit declined 1.1%. We reckon that the lower profitability was largely due to higher staff and operation costs of 17.9% and 12.5% respectively. We understand that the higher staff cost was due to additional headcount and higher performance reward. The higher operating expenses were caused by an increase in marketing and development costs due to greater retail outreach and engagement.

The staff cost-to-total income ratio was higher at 26.4% as opposed to 22.9% in 1HFY13. The cost-to-income ratio (CIR) also increased to 47.7% from 44.8% despite depreciation and amortisation expenses declining 26.7% year-on-year (y-o-y).

Nonetheless, the top line growth was also well supported by better equity market conditions.

Besides, the market also saw higher retail participation for the first six months of the year. The average KLCI and the average KLCI market capitalisation increased 9.4% and 12.2% respectively to 1,862 and RM1,035 billion.

Consequently, we saw improvements in both the daily average trading value (+4.2% y-o-y) and volume (+41.8% y-o-y) to RM2.06 billion and 1.89 billion shares respectively, as opposed to RM1.96 billion and 1.33 billion shares in 1HFY13.

However, we saw a y-o-y decline of 7.4% in derivatives trading revenue despite higher trading volume due to lower guarantee and collateral management fees. We suppose this was due to the lower volatility of the benchmark index.

Besides, a lower effective tax of 26.4% versus 27.1% in 1HFY13 helped in lifting bottom line growth.

Operating revenue and net profit improved 0.3% and 3.8% quarter-on-quarter (q-o-q) respectively, amid mixed market conditions.

We believe the less exciting market trading activities in the second quarter (2QFY14) as opposed to 1QFY14 were due to the FIFA World Cup tournament and the start of the fasting month.

However, bottom line growth was boosted by lower operating expenses, which declined 13.4% q-o-q. CIR registered at 46.6% in 2QFY14 vis-à-vis 48.9% in 1QFY14.

Our market view remains unchanged. We still believe that the underlying liquidity position should remain supportive for the local market (with decent upside). However, we do not rule out a possible pullback/correction in 3QFY14 before recovery in 4QFY14.

No change to our earnings estimates of RM181.9 million and RM201.5 million for FY14 and FY15.

However, we have revised our FY14 dividend per share estimate from 32 sen to 52 sen after taking into consideration the latest 20 sen special dividend. This will translate into FY14 dividend yield of 6.3%.

Consequently, our FY15 and FY16 book values and share estimates are revised lower by 20 sen per share to RM1.34 and RM1.36 respectively.

We maintain our “outperform” call on Bursa for its attractive dividend payments while its share price has appreciated about 8% since our upgrade in late March 2014. Coupled with the potential dividend yield of 6.3%, the potential total return is still more than 10%. — Kenanga Research, July 18




This article first appeared in The Edge Financial Daily, on July 21, 2014.