PETALING JAYA: Bursa Malaysia is seen as an “apolitical” play ahead of a possible 15th General Election (GE15) this year.

       Hong Leong Investment Bank (HLIB) Research in its report said it viewed Bursa as an “apolitical election” play as it benefits via average daily trading volume (ADV) boost but without the “political linkages” – making it a rather compelling investment proposition.

       HLIB Research in its report to clients said the stock exchange operator will likely ride on a potential ADV upside, ahead of GE15.

       “Although the share price has risen 9% since our ‘buy’ upgrade on March 16, we continue to see further upside down the road,” it said.

       The research house said it “continues to advocate the view that Bursa is a beneficiary of GE15 as past general elections have shown a positive impact on ADV on a year-on-year (y-o-y) and month-on-month basis.

       “With increasing probability of an early GE15, we believe investors will eventually start angling on Bursa.

       “Our target price is raised from RM7.27 to RM7.95,” said HLIB Research.

       It noted in the first quarter of 2022, securities average daily contracts (ADC) stood at RM2.60bil, up 2.6% quarter-on-quarter (q-o-q), 48.8% y-o-y, while derivatives ADC was up 10.1% q-o-q and lower by 3.5% y-o-y.

       “Assuming other revenues continue their quarterly run rate at around RM55mil, and barring any unforeseen swings in cost structure, we estimate that earnings in the first quarter of 2022 could come in at RM68mil (up 5.2% q-o-q, down 43.7% y-o-y), forming 27% of our full year forecast,” said the research house

       “While we note the q-o-q increase in ADC (and to a lesser extent, ADV), the impact to bottomline will be partially watered down by fewer trading days,” it added.

       On a y-o-y basis, the estimated steep decline by 43.7% is rather expected given the abnormally high base due to recovery sentiment back then from the global vaccine rollout, which drove trading euphoria, HLIB Research said.

       “Looking ahead post GE15, we reckon that the market would react positively (alongside rejuvenated ADV) should the election outcome see the victor secure a convincing mandate – a plausible scenario considering the recent state polls in Johor, Melaka and Sarawak.”

       At last look, Bursa was at RM6.99 per share, valuing the whole stock exchange at some RM5.6bil.