BURSA – Fundamental Analysis (14 Feb 2016)

Fundamental Analysis as of FY15 – http://www.slideshare.net/lcchong76/bursa-fundamental-analysis-fy15

Excel – http://1drv.ms/1PJDeDO

Latest Financial – Q4 2015 Financial Report (2 Feb 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4991505

FY15 Q4 Results Highlight:

  • Bursa’s 4QFY15 securities trading revenue improved to RM59.8m (+2.2%yoy and +4.3%qoq) in tandem with higher securities ADV traded of RM2.04b (+7.4%yoy and +5.6%qoq).
  • For derivatives trading revenue, it jumped 16.7%yoy to RM22.1m but was lower by -7.7%qoq due to drop in ADC traded for both FCPO (-3.5%qoq) and FKLI (-26%qoq) contracts.
  • Meanwhile, BSAS continued to register strong revenue growth of 40%yoy and 17.7%qoq to RM5.0m in 4QFY15.
  • Key Operating Drivers:

BURSA-FY15-Q4-Drivers

Valuation:

I think fair value of BURSA range from 8.8 to 9.7. Uncertainty risk of fair value is close to High.

BURSA-FY15-Q4-Football-Field

Going Forward:

In 2016, retail investors/traders likely to stay on the sideline and become more vigilant with their trading habits given the current choppy market environment. Behavioral finance studies have also shown that investors tend to be more loss averse rather than risk averse, leading to this to effect.

On the other hand, the recent return of foreign funds and impending injection of local funds in 4QFY15 as positive to rejuvenate trading activity in the securities market in the coming months.

The global environment remains challenging with the recovery in high-income economies being gradual and global trade growing at its slowest pace since 2009 (The World Bank, 4 Oct 2015). Malaysia is affected by internal and external factors, particularly the weakening of the Ringgit, with its economic growth currently projected at 4.7% compared to 5.2% at the start of the year. Malaysia remains amongst the world’s healthiest Islamic economic environment (Halal Focus, 28 Sep 2015) that will underpin the interest of its Shariah compliant securities, despite the current global economic situation. Increased adoption of Murabaha and Tawarruq’ contracts in the domestic market for liquidity management as well as the tenor based pricing have deepened the usage and will further spur the growth of Bursa Suq Al-Sila’ (BSAS) activities.

I remain sanguine on the company’s outlook over the longer term. Its business model is also fairly resilient. As mentioned above, recurring and other incomes, including interest income, is sufficient to cover some 91% of total operating expenses.

I will continue to hold this share, and accumulate it if there is a discount.

At the time of writing, I owned shares of BURSA.

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