KUALA LUMPUR: With trading values on Bursa Malaysia staying subdued amid an uncertain trading environment, the stock exchange operator is working on a series of initiatives in an effort to stimulate the tepid market.

Investment research outfit Kenanga Research said Bursa Malaysia Bhd was making new efforts to drive non-trading revenue such as the launch of the Bursa Gold Dinar and a new debt fundraising platform with RAM.

Bursa Malaysia’s inaugural carbon credit auction held in March 2023 could also serve as a platform for sustainable revenue in the near term, it added.

Meanwhile, the slew of initial public offerings (IPO) being held this year could help to spark investor participation in the domestic market.

“The traction from recent IPOs could continue to fuel retailers’ interest, with Bursa indicating a pipeline of 39 IPOs this year,” said Kenanga in its results note.

On its expectations, however, the research firm said the securities average daily traded value (ADV) could continue to be slow as participation did not pick up meaningfully despite a more stable domestic political landscape, better economic performance and the reopening of China’s borders.

That being said, Kenanga’s projected pre-tax profit for Bursa Malaysia in FY23 falls within the stock exchange operator’s target of RM295mil to RM326mil.

The stock exchange operator announced its first-quarter financial results yesterday, which revealed a decline in operating revenue due to softness in the securities market.

On a year-on-year (y-o-y) basis, operating revenue fell 6% on the back of a 15% decline in securities trading revenue.

“Period ADV closed at RM2.14bil (3MFY22: RM2.6bil) as trading sentiment cooled.

“That said, this was an 11% increase from 4QFY22’s RM1.94bil as overall activities grew more encouraging,” reported Kenanga.

Meanwhile, derivatives trading also declined 8% as commodity prices were less volatile.

Cost-to-income ratio rose to 51.3% (up 7.4 percentage points) as new business segments and product launches triggered higher depreciation and operating expenses.

Overall, this led to 1QFY23 net profit coming in at RM56.2mil, which was 17% lower than in the same quarter in 2022. The result was within Kenanga’s and consensus expectations at 25% and 24% of full-year forecasts respectively.

Post-results, Kenanga maintained its “market perform” recommendation on the stock with a target price of RM6.25 based on an unchanged 20x FY24 forecast price-earnings ratio, in line with global exchange peers’ average.

“Risk-reward ratios appear fair as a lack of strong medium-term catalysts to deliver earnings surprises is cushioned by its solid return on equity (ROE) and stable dividend prospects,” it said.