RHB IB Research lowers target price for Bursa Malaysia to RM6.80
Published on 03 Oct 2019. | Source: theedgemarkets.com
KUALA LUMPUR (Oct 3): RHB Investment Bank Bhd Research has lowered its 2019 net profit forecast for Bursa Malaysia Bhd by 0.5%, due to its lower 2019 forecast securities average daily value (SADV) assumption by 4% to RM2.2 billion.
The SADV forecast is lower compared with RM2.57 billion recorded in 2018.
In a note today, RHB Research said Bursa Malaysia's SADV on market trades (OMT) fell 17% year-on-year in the third quarter of 2019 (3Q19), and was down 7% quarter-on-quarter, to RM1.84 billion.
Despite weak 3Q19 SADV, the research house sees the potential for SADV improvement through 2020.
"We believe news flow on the US-China trade talks could keep equities trading relatively active in 4Q19, as investors reposition their portfolios. We assume 2020F OMT and direct business trade (DBT) SADV at RM2.25 billion," it noted.
Meanwhile, it forecast dividend per share of 23.7 sen for FY19, which is lower compared to 33.6 sen (including an 8 sen special dividend) Bursa Malaysia delivered in FY18.
However, it said the 2019F dividend yield (without factoring in any special dividend) is a respectable 4%, which is higher than the 10-year Malaysia sovereign bond yield of 3.3%.
Nonetheless, the research house maintained its buy call on the counter with a lower target price of RM6.80 from RM7.40 previously.
"Hypothetically, if FY20F SADV were 20% lower than our base case at RM1.8 billion, the stock's fair value would be RM5.70," it added.
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