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On Thursday, UBS analyst Benjamin Tan upgraded Bursa Malaysia Bhd (BURSA:MK) stock rating from Neutral to Buy, albeit with a reduced price target of MYR8.40, down from MYR8.60. Tan highlighted the stock’s 16% year-to-date decline, which has underperformed the KLCI by approximately 10%, as a catalyst for the rating change. The revised valuation now stands at 19.5 times forward P/E, which is one standard deviation below the mean and positions Bursa Malaysia as the least expensive among its Asian peers.
The upgrade comes after a reassessment of Bursa Malaysia’s prospects in light of the current market volatility. Historical data suggests that Bursa Malaysia has often outperformed both the KLCI and Malaysian banks during such periods, a trend that could be favorable given the positive earnings impact from higher average daily trading volumes (ADTV), which account for 65-70% of the company’s revenue.
Despite the upgrade, UBS has slightly lowered its earnings per share (EPS) forecasts for the fiscal years 2025-26 by 2-5%, which is approximately 7% below the consensus. This conservative estimate reflects a market pricing in a considerable amount of downside risk. Nevertheless, with a price target implying a 14% upside potential at the current price, UBS sees an attractive risk-reward balance for investors.
Tan’s commentary underscores the shift in perception towards Bursa Malaysia’s stock, as it now appears to offer a compelling buy opportunity in the context of its historical performance during market volatility. The price target adjustment to MYR8.40 is based on an unchanged 24x FY25E P/E ratio, despite the lowered EPS projections.
Investors may find the new UBS rating and price target an important consideration when evaluating Bursa Malaysia’s stock, as the firm’s analysis points to a potential for growth amidst the current economic climate. The recommendation reflects a nuanced view of the stock’s performance and valuation metrics in comparison to regional counterparts.
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