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3 Things You Should Know About Bursa Malaysia
By: Brian Brinker
Articles (44) Profile
By: Ong Qiuying
Articles (131) Profile

Here are 3 things you need to know about Bursa Malaysia:

Financial Highlights
Bursa Malaysia has enjoyed strong growth in operating revenue over the last several years with a compound annual growth rate (CAGR) of 10 percent from FY09 to FY13. In FY09, the company’s operating revenue came in at only RM297.8 million. By FY13, its revenue has hit RM439.8 million, which was up 13 percent year-on-year from FY12’s RM388.5 million.

Bursa Malaysia’s profit after tax and minority interest (PATMI) was RM173.1 million in FY13, growing from RM98.6 million in FY09. Notably, cost to income ratio has also been declining over the same period from 56.5 percent in FY09 to 48.3 percent in FY13.

In its latest 1Q14 results, Bursa Malaysia recorded a PATMI of RM45.1 million or an increase of 18 percent on the back of a 13 percent growth in operating revenue to RM115.1 million, boosted by double-digit growth in trades from the securities and derivatives market.

Behind Bursa Malaysia’s upward growth trajectory has been encouraging trading activities. Notably, average daily trading value (ADV) for the securities market has grown 26 percent to RM2.2 billion in 1Q14 as a result of higher trading participation from retail investors in tandem with its targeted outreach activities.

Latest Developments

• Bursa Malaysia aims to engage younger Malaysians between ages 25 to 35 via its e-initiative, a digital and inclusive platform to grow retail participation. The platform, “BURSAMKTPLC”, or Bursa Marketplace, aims to be a one-stop shop for investors and will offer a variety of easy-to-use and powerful search tools .
• Bursa Malaysia continues to expand its product offerings. The firm launched an Environmental, Social and Governance Index (ESG), where it can tap into the US$3.4 trillion (RM10.9 trillion) market for socially responsible investing and promote openness and transparency.
• Raising the number of products on Bursa Malaysia’s derivatives platform to 12, Bursa Malaysia recently launched a US$-denominated Refined Bleached and Deodorised Palm Olein Futures Contract (FPOL) on the back of the launch of gold futures contract in 4Q13.
• Bursa Malaysia sponsored the world’s largest palm oil conference back in March, reinforcing the country’s position as the global palm oil marketplace. Palm oil companies are major participants on the KLSE, and palm oil is a hotly traded commodity.
• In December 2013, Bursa Malaysia and NASDAQ OMX Group launched a new trading engine, Bursa Trade Securities 2. This exchange technology is among the most advanced in the world and places the company at the forefront of the financial services sector.
• CME Group and Bursa Malaysia previously formed a strategic partnership which includes licensing of settlement prices of the Crude Palm Oil Futures and global distribution of its derivatives contracts through the CME Globex electronic trading platform.

How is the outlook like for the Malaysian stock exchange? Click here to find out more.

Brokers’ Recommendations & Catalysts
Maybank IB Research has a “Hold” rating on Bursa Malaysia with a target price of RM8. The house notes that Bursa Malaysia’s 1Q14 net profit, mainly driven by its equity business, was in line at 24 percent of the consensus full-year forecast.

Maybank expects the house’s planned product launches to support equities ADV and derivatives volume growth.

Separately, several houses have a “Buy” call on the stock, such as AmResearch, RHB Research, MIDF Research, Kenanga Research and CIMB Research with the target prices of RM9.50, RM9, RM9.38, RM8.60 and RM10 respectively.

CIMB Research, in particular, has a positive outlook for the equity market, with an end-2014 KLCI target of 2,030. The house notes that the exchange will be a key beneficiary of an active equity market and is also positive on the prospects for its derivatives business as the trading of its products on the Globex system will give the company access to international clients.

Given the general trends and development of Malaysia’s financial services sector, Bursa Malaysia should enjoy growth in the future. Even if the company does suffer some short-term setbacks, the company should be able to enjoy strong growth in the years to come. Its IPO pipeline and new products are potential areas that will drive growth for the company.

Price Chart Of Bursa Malaysia

Source: FactSet

This article is brought to you by Bursa Malaysia Berhad. The research in this article was conducted independently by Pioneers & Leaders (Publishers) Pte Ltd (“Pioneers & Leaders”) and the views and opinions expressed in this article are Pioneers & Leaders’ own and do not represent the views and opinions of Bursa Malaysia. Bursa Malaysia does not warrant or represent, expressly or impliedly as to the accuracy, completeness and currency of the information in this article. In no event shall Bursa Malaysia be liable to the reader or any other third party for any claim howsoever arising out of or in relation to this article.
This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

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