PETALING JAYA: Bursa Malaysia’s earnings for this year are expected to decline by 30% even with the benefit of the 15th General Election (GE15).

       This is so since the positive effects of GE15 have already been factored into its current valuations.

       Only a modest trading upside can be expected, said UOB Kay Hian Research and this is on assumptions of mean price-to-earnings (PE) valuations. It said it derived a fair value of RM7.24 a share, representing a modest 5% upside from current share price levels.

       It expects full-year average daily value to settle at RM2.4bil versus the first quarter financial year 2022’s (1Q22) RM2.6bil.

       Given the current market uncertainties, prevailing average daily volume (ADV) has already moderated downwards to RM2bil on April 22, laying the foundation for a potentially weaker 2Q22 ADV outlook, it said.

       It added that given the fact that the ADV tends to normalise downwards after the general election, the stock should be trading below mean PE valuations on 2022 earnings.

       It said current valuations are already close to the mean PE of 23 times on the mean ADV assumptions for 2022.

       It added that the market had largely priced in the positive sentiment arising from a potential GE15 on Bursa’s ADV in 2022.

       The stock’s current valuations of 22.5 times 2022 PE is close to its 10-year historical mean of 23 times. Its earnings estimate for 2022 is already based on ADV assumptions (RM2.4bil) that are 20% above its pre-Covid-19 10-year average level of RM2bil to factor in the positive impact of GE15 to ADV.

       Based on all those factors, it has maintained its “hold’’ recommendation on the stock with a target price of RM6.40 a share. This is based on 21 times the 2022 PE, minus 0.5 standard deviation to the historical mean PE, it said.

       Bursa recently released its 1Q22 results where it posted a net profit of RM67.9mil (a 44.1% fall year-on-year and a 4.6% increase quarter-on-quarter).