KUCHING: Bursa Malaysia Bhd (Bursa) will potentially end the financial year 2016 (FY16) on a lower note due to weaker trading activities in both securities and derivatives markets.
In a report, MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) noted that Bursa, which is expected to release its fourth quarter of FY16 (4QFY16) results early next month, could see its profit after tax, amortisation, and minority interest (PATAMI) come in between RM41 million and RM42 million.
It added, this would see a respective decline of 17.9 per cent year-on-year (y-o-y) and 5.6 per cent quarter-on-quarter (q-o-q).
Cumulatively, it pointed out that the PATAMI of RM185 million (down 10.4 per cent y-o-y) was still expected to fall within the proximity of its FY16 earnings estimates of RM195.8 million.
“We gather that securities ADV traded (OMT) in 4QFY16 has fallen sharply to the lowest level of RM1.66 billion (down 18.4 per cent y-o-y and 3.5 per cent q-o-q) since 4QFY13 of RM1.67 billion, with a velocity of 25 per cent only.
“Meanwhile, its cumulative securities ADV traded of RM1.79 billion (down 9.2 per cent y-o-y) hits lowest level since 2012 of RM1.56 billion.
“The downturn was dragged by lower ADV traded of RM1.43b for the month of December 2016 due to long year-end holiday,” the research team said.
MIDF Research also pointed out that the downturn could be attributable to a substantial amount of foreign net outflow in that particular quarter, having seen net foreign ownership declined to 22.3 per cent in 4QFY16 from 22.8 per cent in 3QFY16.
It projected, “We estimate its revenue from securities trading activities would plunge to RM50.1 million (down 16 per cent y-o-y and down 2.1 per cent q-o-q) in 4QFY16.”
It noted that derivatives ADC traded has slightly dropped to 55,075 contracts (down 1.4 per cent y-o-y and down two per cent q-o-q)) in 4QFY16 from 55,883 and 56,222 contracts in 4QFY15 and 3QFY16 respectively.
“We opine this was due to flattish trading activities in both FKLI and FCPO markets at ADC traded of 10,576 (down 12.5 per cent y-o-y and 44,500 (an increase of 1.6 per cent y-o-y) following a festive season.
“We estimate its revenue from this segment would be around RM20.5 million (down 6.8 per cent y-o-y and down 1.4 per cent y-o-y) in 4QFY16,” MIDF Research said.
On listings fee income, it said, it expected the income to be lower in 4QFY16 based on the size of fund raised of circa RM4.8 billion against RM8.2 billion in 4QFY15.
Overall, the research team retained its existing forecast as it expected the results to come in line with its expectations.
It also maintained a ‘neutral’ recommendation on Bursa, with an unchanged target price of RM8.96 per share.