Date and Broker Information
Date: September 16, 2024
Broker: Maybank Investment Bank Berhad

ESG Performance and Carbon Neutrality

Bursa Malaysia (BURSA MK) continues to lead in its sustainability efforts, achieving an ESG score of 68 out of 100, which is above average. The company has maintained carbon neutrality for the third consecutive year by offsetting all Scope 1 and Scope 3 greenhouse gas (GHG) emissions through the purchase and retirement of 3,668 tCO2e of carbon credits. Additionally, Bursa Malaysia has begun the transition to green energy with the installation of a rooftop solar photovoltaic system and the utilization of Renewable Energy Certificates (RECs), accounting for 3,624 tCO2e in 2023. This has helped reduce Scope 2 emissions by 63%. For 2024, the company plans to further diversify its energy mix and introduce hybrid or electric vehicles (EV) for its fleet.

Bursa Carbon Exchange (BCX) Initiatives

Bursa Malaysia plays a pivotal role in supporting Malaysia’s 2050 net-zero target through the Bursa Carbon Exchange (BCX). BCX began facilitating the trading and off-market transactions of carbon credits in September 2023, following a price discovery auction in March. Collaborations with key partners, such as Gold Standard and Sarawak Energy, were established to expand the offerings of high-quality carbon credits and to explore the trade of Renewable Energy Certificates aligned with globally recognized standards.

Financial Performance and Outlook

For 2023, Bursa Malaysia reported revenue of MYR616.5 million, an EBITDA of MYR355.3 million, and a core net profit of MYR252.4 million. The revenue is projected to increase to MYR778.5 million in 2024, with an EBITDA of MYR460.7 million and a core net profit of MYR313.0 million. Bursa Malaysia is valued on a 24x PER for mid-FY25 earnings per share, with a target price of MYR9.50. Key assumptions include an average daily value (ADV) for equities of MYR3.5 billion to MYR3.7 billion for 2024/2025 and an 18% growth in derivative contracts in 2024, maintaining positive momentum.

Value Proposition and Market Position

Bursa Malaysia is one of the larger bourses in ASEAN, with 995 public listed companies (PLCs) and 19 Real Estate Investment Trusts (REITs), and a total market capitalization of MYR1.8 trillion at the end of 2023. It is also the world’s largest palm oil futures trading hub. Despite fluctuations in trading volumes over the years, Bursa Malaysia has demonstrated resilience, with equity ADV reaching MYR4.3 billion in 2020 and stabilizing at MYR3.7 billion in 2021. The exchange continues to benefit from strong derivative volume growth, with a compound annual growth rate (CAGR) of 18% over 2010-2015.

ESG Commitments and Governance

Bursa Malaysia is committed to fostering sustainable growth, with its sustainability efforts guided by global best practices. The company introduced its Sustainability Roadmap 2024-2026, which aims to enhance ESG disclosures for listed companies, provide incentives for ESG adoption, and expand the marketplace for ESG products and services. Internally, Bursa Malaysia focuses on improving sustainability practices, building internal capabilities, and driving impactful community projects through its Yayasan Bursa Malaysia foundation.

In terms of governance, Bursa Malaysia’s Board consists of nine directors, including eight independent non-executive directors (INED) and one executive director (CEO). The Board includes three Public Interest Directors appointed by the Minister of Finance. Women represent 33% of the Board, aligning with the company’s commitment to diversity. The company also upholds strong corporate governance with a detailed remuneration policy and a well-established whistleblower policy.

Risks and Opportunities

Bursa Malaysia faces several upside opportunities, including increased trading activity, particularly in the derivatives and palm oil markets, as well as potential gains from higher volatility in palm oil prices and the FBM KLCI index. However, downside risks include reduced liquidity leading to a decrease in equity ADV, lower-than-expected derivatives trading, and further foreign fund retrenchment. As of June 2024, foreign shareholding in Bursa Malaysia was 19.5%.

Conclusion

With a strong commitment to sustainability and ESG practices, coupled with solid financial performance and growth prospects, Bursa Malaysia is well-positioned to navigate both challenges and opportunities in the evolving global financial landscape.