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aws全区号(www.2km.me)_Lower volume seen to affect Bursa’s Q4 results

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Assuming other revenue for Bursa Malaysia continues its quarterly run rate of about RM55mil with an unchanged cost structure, Hong Leong Investment Bank Research (HLIB) estimates that Q4’21 earnings for the exchange could amount to RM68mil – a q-o-q and y-o-y decline of 15.4% and 35.5%, respectively.

PETALING JAYA: Bursa Malaysia Bhd is likely to see an earnings dent from lower average daily trading volume (ADV) as liquidity in the stock market plummets to a fraction of what it used to be during the market rally back in 2020.

In the fourth quarter of last year (Q4’21), equities ADV came in at RM2.55bil, which is a quarter-on-quarter (q-o-q) decline of 11.7% and a year-on-year (y-o-y) drop of 47.2%.

Meanwhile, average daily contracts (ADC) for the derivatives market declined by 0.3% q-o-q and 0.8% y-o-y to 70,400.

Assuming other revenue for Bursa Malaysia continues its quarterly run rate of about RM55mil with an unchanged cost structure, Hong Leong Investment Bank Research (HLIB) estimates that Q4’21 earnings for the exchange could amount to RM68mil – a q-o-q and y-o-y decline of 15.4% and 35.5%, respectively.

This would bring financial year 2021 (FY21) earnings to RM358mil, a decrease of 5.3% y-o-y.

Bursa Malaysia is tentatively scheduled to release its Q4’21 results on Jan 28.

Notably, the reinstatement of the stamp duty cap, albeit at a higher ceiling of RM1,000 versus RM200 previously, would help keep trading cost reasonable and in line with neighbouring bourses.

To recap, a stamp duty restructuring was tabled during Budget 2022 which initially involved a higher rate from 0.10% to 0.15%, the abolishment of the RM200 per contract cap, and the removal of the sales and service tax on brokerages.

However, on Dec 30, the Finance Ministry confirmed that a stamp duty cap would be reintroduced at RM1,000 per contract, which took effect on Jan 1.

“We are positive on the cap reintroduction as it would ensure that the trading cost is kept at reasonable levels and the local bourse remains competitive,” the research house said.

Nonetheless, this will do little to offset the declining interest in the market.

HLIB pointed out that January month-to-date ADV numbers were off to a timid start at RM2bil.

“Although the cap reinstatement was a positive move, we keep our earnings forecast unchanged, which imputes a 30% y-o-y decline in FY22 ADV to RM2.48bil.

“While still in its early days, month-to-date January ADV of RM2.04bil is running below our assumption,” it said.

The brokerage has kept its “hold” rating on the counter with a target price of RM5.95.

This is based on a 20-times price-earnings ratio that is tagged to the FY22 earnings per share.

“For sanity check, we note that the share price of Bursa Malaysia averaged RM5.85 from FY17-FY18 when ADV was chalking up RM2.3bil to RM2.4bil, with earnings at RM223mil to RM224mil.

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