Bursa Malaysia Berhad (BURSA) Earnings Call Transcript & Summary

[Foreign Language] A very good afternoon to all our attendees, members of the media, ladies and gentlemen. And on behalf of Bursa Malaysia, we welcome you to Bursa Malaysia's financial results media briefing for the first half of financial year 2025. I'm Izreen Fara, and I shall be your emcee for today's briefing. We are pleased to have our leadership team with us who will take you through this afternoon's agenda. Please allow me to introduce you to Dato Fad'l Mohamed, Chief Executive Officer of Bursa Malaysia; Puan Rasmona Abdul Rahman, Acting Chief Financial Officer of Bursa Malaysia. Ladies and gentlemen, the briefing today shall be in 2 parts. Firstly, Dato Fad'l will be presenting on the key financial highlights and market performance. This will then be followed by a presentation on Bursa Malaysia's financial review by Puan Rasmona. Following their respective presentations, we'll then move on to the Q&A session. Members of the media, ladies and gentlemen, before we begin today's briefing, please note that this briefing is being recorded and streamed live via Zoom as this is a hybrid session. As a housekeeping note, for those present here today, please keep your mobile phones on silent. For virtual attendees, should your screen suddenly turn blank, kindly check your Internet connection and try to relog in. Should there be any questions addressed to the panelists, please keep them until the end of the session, where we will then open the floor for the Q&A session for both our physical and virtual attendees. Ladies and gentlemen, members of the media, without further ado, we are pleased to invite Dato Fad'l Mohamed, Chief Executive Officer of Bursa Malaysia, to begin his presentation. [Foreign Language].

Thank you, Izreen. [Foreign Language] Very good afternoon to everyone, and thank you to all those physically and also those attending virtually for attending Bursa Malaysia Berhad's financial results briefing For the first half of financial year 2025. With us today is our Acting CFO, Puan Rasmona Abdul Rahman. The deck I will be sharing is now available on Bursa Malaysia's corporate website. We will be answering questions during the Q&A session after the presentation. If I can take you through to the next slide, let me first contextualize the macroeconomic and geopolitical landscape that we currently are in. In November 2024, when the change in the U.S. administration was announced, global and local markets were relatively volatile and then investors became more cautious in subsequent months. Towards the end of last year, ADV, average daily value, was at MYR 3.2 billion. ADV declined post Liberation Day, coupled with other geopolitical events, resulting in a year-to-date June ADV of MYR 2.46 billion. Despite these challenges, we continued to be a strong fundraising platform as we achieved the most IPOs, highest amount of funds raised from IPOs, biggest IPO market capitalization in ASEAN as at end June 2025. Against this backdrop, all our business segments also recorded higher revenue, except for securities trading. Derivatives trading revenue increased by 8.1% year-on-year and nontrading revenue also increased by 7.6% year-on-year. Given the high weightage on securities market trading, the total operating revenue moderated by 8.1% year-on-year to MYR 344.3 million. We will continue to invest for longer-term growth by investing in human capital, technology and infrastructure. We will continue to execute the initiatives planned in financial year 2025 under the Strategic Roadmap 2024 to 2026 with some of the areas of focus that I will present after our financial review. As at today, we have listed 38 companies in 2025, 6 main markets, 29 ACE markets and 3 LEAP markets and have helped these companies raise more than MYR 4.2 billion. We are also seeing Singapore secondary listings interests. As soon as this Friday, we will be welcoming SGX-listed company, UMS Integration Limited, for its secondary listing on the main market. The IPO pipeline remains healthy with applications being processed by the SC and Bursa Malaysia. As such, based on the above-mentioned IPO pipeline, our target of 60 IPOs as well as the target market capitalization are still within reach. As you're aware, Bank Negara Malaysia took a preemptive move to cut OPR to 2.75%, which has been unchanged at 3% since May 2023 to ensure that the country's economic growth is preserved. Robust economic fundamentals underpinned by strong domestic demand and diversified export structure, coupled with attractive FBMKLCI valuation at a discount of 17% to its 10-year mean could provide potential upside. Moving on to the next slide, allow me to take you through our financial highlights and market performance for the first half of financial year 2025. As mentioned, revenue from all business segments were higher year-on-year except for securities trading. Meanwhile, operating expenses was up by 6.6% year-on-year to MYR 189.3 million, mainly due to the increase in staff costs, IT maintenance and administrative costs. Operating revenue decreased by MYR 30.2 million and operating expenses rose by MYR 11.7 million, resulting in a softer PATAMI of MYR 125.5 million. Due to the decrease in revenue, cost-to-income ratio increased by 7 percentage points to 53% in first half 2025. Consequently, ROE declined by 7 percentage points to 30%. Earnings per share declined by 19.3% to MYR 0.155 in line with PATAMI. On the next slide, I'm pleased to share that the Board of Directors has declared an interim dividend of MYR 0.14 per share for the financial year ending 31st December 2025. This amounts to approximately MYR 113.3 million, representing a dividend payout ratio of 90.3% in line with previous years. The entitlement date is 20th August, and the payment date is 27th August 2025. Based on our share price of MYR 7.63 on 30th June 2025, the dividend yield is 3.7%. On the next slide, let's look into our securities market. In the first half of the year, the number of IPOs grew by 52.4% to 32 IPOs compared to the same period last year. The IPO market of these IPOs more than doubled -- the IPO market cap of these IPOs more than doubled compared to previous corresponding period. The amount of funds raised was 82% higher year-on-year at about MYR 4 billion. Meanwhile, we have listed 141 more structured warrants compared to last year. In the next slide, in the derivatives market, average daily contracts increased by 14.1% year-on-year to 96,913 contracts mainly due to the higher number of FCPO contracts traded, which grew by 17.2% year-on-year. That made up 84% of the average daily contracts traded. Foreign institutional investors continued to dominate the ADC traded as their participation rate increased by 2 percentage points to 64%. ADC for T+1 night trading session continued to gain traction as it increased by 37.8% year-on-year to 14,129, making up 15.6% of total ADC. In the next slide, Islamic markets. Bursa Suq al-Sila, BSAS, ADV was up by 12.4% (sic) [ 12.5% ] year-on-year to MYR 48 billion, supported by the growth in both domestic and foreign participants. ADV from domestic participants improved by 8.2% to MYR 38.3 billion, while foreign participants added 33% in ADV during the quarter. Local participants remained the main traders, making up 80% of total BSAS ADV. In the first half 2025, BSAS onboarded 12 new trading participants that consisted of 9 local and 3 foreign participants, bringing the total to 385. From the Islamic equities perspective, 81% of stocks listed on Bursa Malaysia are Sharia-compliant. So we now go into the financial review. And with that, I would like to invite our Acting CFO, Puan Rasmona Abdul Rahman, to present the financial review section. Thank you.

Thank you, Dato Fad'l, and a very good afternoon to all. I will be taking you through Bursa Malaysia's financials for first half of 2025. This slide shows the snapshot of our quarter-on-quarter as well as the year-on-year performance. Our operating revenue, of which approximately 62% is directly influenced by the market performance, declined by 8.1% to MYR 344.3 million in first half of 2025 as compared to MYR 374.5 million in first half of 2024. The lower operating revenue was mainly due to lower securities trading revenue and has also affected our quarterly operating revenue, which registered a 14% reduction compared to the previous corresponding quarter. As for the operating expenses, we saw an increase of 6.5% quarter-on-quarter and 6.6% year-on-year, mainly due to staff costs, IT maintenance as well as other operating expenses. As a result of these movements, our first half of 2025 PATAMI decreased by 19.3% and our cost-to-income ratio recorded an increase of 7 percentage points at 53% compared to the same period of last year. Now let me go through the details of these movements in the next 2 slides. For the first half of 2025, all of our operating revenue segments recorded an increase year-on-year except for the securities trading revenue. The total operating revenue, however, decreased 8.1% due to the lower average daily value of trades recorded as securities trading remained the largest contributor to the total at 42%. Derivatives trading revenue, which represents approximately 16% of the group's total operating revenue in first half of 2025, saw a notable increase of 8.1% year-on-year. This is mainly due to the higher average daily contract of the CPO futures contracts as we saw higher volatility of the underlying CPO prices during this period. BSAS trading revenue has also shown an increase of 14.7% from MYR 8.4 million in first half of 2024 to MYR 9.6 million in first half of 2025 mainly due to higher overall BSAS trades attributable to our active engagements with both local and foreign participants. Our nontrading revenue improved by 7.6% in first half of 2025 driven by higher listing and issuer services, depository services as well as data business revenue. The increased in depository services revenue was mainly due to higher securities borrowing and lending transactions as well as higher number of listings. We also saw higher number of data subscribers and the CSI solution services fees that led to higher data business revenue. If I can move on to the next slide, which is on operating expenses. We recorded an increase of 6.6% in our total operating expenses for first half of 2025, mainly from higher staff costs, IT maintenance and other operating expenses. The increase in staff cost is mainly due to the higher number of head count as we built capacity, expanded and improved our services while the increase in IT maintenance was mainly due to renewal of maintenance contracts and higher cost for cloud as well as cybersecurity services. The increase in other operating expenses was mainly due to higher subscription expenses incurred for our business. These movements brought the total OpEx for first half of 2025 to MYR 189.3 million, higher by 6.6% compared to the MYR 177.6 million recorded in first half of 2024. With this, I hand back the session to Dato Fad'l. Thank you.

Thank you, Mona. Now allow me to take you through our strategic highlights. On the next slide, as a national multi-asset exchange, we remain clear in our purpose for Bursa Malaysia to create an inclusive and vibrant marketplace for fundraising and investments. Moving on to the next slide. These are some of the key strategic highlights. I'm pleased that we have made good progress in first half 2025 in executing our Strategic Roadmap 2024 to 2026. Key initiatives to enhance the breadth and depth of our product and service offerings include, firstly, launch of Malaysia's first commodity futures structured warrant, which aims to provide new opportunities for investors to gain exposure to crude palm oil futures, FCPO. Secondly, we forged partnership with Fullgoal Asset Management Limited and CGS International Securities Malaysia to facilitate listing of foreign underlying exchange-traded funds on Bursa Malaysia. Thirdly, for the derivatives market, we launched single stock futures, SSFs. This relaunch introduces key enhancements such as small contract size making derivatives offering more accessible and cost effective. We continued to advance on ecosystem development key initiatives in the first half 2025. Firstly, launch of Shares2U, a securities transfer scheme that enables participating organizations to reward retail investors with eligible Bursa Malaysia-listed shares as part of their marketing campaign to attract more investors. Secondly, the Bursa Research Incentive Scheme Plus, BURSA RISE+, was launched to enhance visibility and corporate profile of selected Malaysian companies. Building upon the earlier effective BURSA RISE initiative, the research coverage of BURSA RISE+ is wider to encompass not just selected PLCs, but also private companies with growth potential as well as pre-IPO firms on route to listing. On the sustainability front, we launched Bursa Malaysia Sustainability Accelerator Programme to fast-track readiness of PLCs to adopt the national sustainability reporting framework. On the next slide, in terms of our way forward, let me speak on that in terms of our way forward. Over the past 5 months, I have taken the opportunity to look at the strategic alignment and parities of Bursa Malaysia. I will build upon the exchange's solid foundation and reinforce strength going forward. The Strategic Roadmap 2024 that was developed in 2023 well supports Bursa Malaysia's aspiration to advance as a national multi-asset exchange. Hence, we will continue to execute the road map as planned. There are opportunities to realign and refresh in several areas as we continuously future-proof the business to meet the evolving needs of our customers. So if I could move to the next slide. In the immediate term, the rest of 2025 and in 2026, Bursa Malaysia will focus on 6 key areas. Firstly, Bursa Malaysia will continue to fortify our role as a key fundraising platform to serve as an enabler for Malaysia's economic growth. We continue to scale up SMEs via the capital market. Since 2020, since June until -- since 2020 until June 2025, Bursa Malaysia has facilitated close to 140 companies to list on the ACE market and another 32 listings on the LEAP market. Over the same period, more than 40 LEAP and ACE companies have graduated to the larger segments. Going forward, we will leverage our strategic partnerships with relevant organizations such as TERAJU and MIDA to expand awareness of the various avenues of fundraising. We are also working closely with relevant stakeholders to explore listings by strategic industries such as data centers and also companies in the semiconductor value chain and supply chain. Secondly, it is key for us to drive market vibrancy, build stronger and more sustainable trading participation across retail and institutional investors, both local and foreign. Bursa Malaysia launched the Vibrancy Initiative Programme, VIP, to enhance market liquidity and competitiveness. It offers structured incentives to liquidity providers and proprietary trading firms through the Pilot Market Making Programme, PMMP, and Volume Based Incentive Programme, VBIP. By onboarding LPs, liquidity providers, and promoting active trading in Malaysian equities, Bursa Malaysia aims to boost volume, narrow spreads and attract stronger foreign participation. Building a more inclusive retail trading participation remains a priority for us. Currently, only 10% of the Malaysian population aged 20 and above holds a central depository systems account, CDS account. Hence, there is still much room to broaden retail investors access to our marketplace via efforts to build financial literacy. Thirdly, we will leverage on our Islamic capital market strength to sharpen our brand key marketplace for Sharia-compliant products. We aim to build stronger thought leadership and engage relevant investors in a more targeted manner. Fourth, I would like to touch on to amplify the exploration of our data and technology-based opportunities. Over the past 5 years, revenue from our data business doubled from MYR 39 million in 2019 to MYR 78 million in 2024. The growth -- this growth reflects the rising demand for high-quality, actionable data across financial and sustainability domains. We are now expanding our data business through the scaling of the subscriber base for our Centralised Sustainability Intelligence solution. We will also be actively exploring the potential of emerging technologies such as artificial intelligence, AI, to enhance our offerings. While the usage of generative AI within Bursa Malaysia is still in its early stages, I'm pleased that Bursa has already taken steps forward with specific partners and have begun to offer generative AI-powered tools to our market. Fifth, we are furthering our sustainability agenda, particularly on decarbonization. This is essential not only for supporting Malaysia's energy transition, but also to ensure our PLCs remain globally competitive and investable. Last but not least, we will enhance customer experience and marketing. We are stepping up efforts to engage with our customers better and how we facilitate access to more targeted marketing to the insights we provide. On the next slide, in terms of second half initiatives. In alignment with our Strategic Roadmap, we will continue to implement our initiatives across all strategic pillars in line with the 6 focus areas that I've just shared with you. The first pillar focuses on strengthening our securities market by providing a better ecosystem for investing and fundraising and more diversity in our products, including exciting IPOs. We are enhancing MyBURSA to build it up into a one-stop investor platform that delivers comprehensive information, tools and solutions to our customers. For the derivatives market, our focus is to further broaden our product suite beyond commodities. For example, we are strengthening our equity-based products, including building up liquidity in single stock futures that was launched in March where we are exploring new smaller-sized contracts to facilitate trading by retail participants. As for Bursa Suq al-Sila, we are continuing to expand our footprint to new countries and participants including digital banks and also nonbank financial institutions. With respect to our new businesses, i.e., Bursa Carbon Exchange, Bursa Gold Dinar and BR Capital, our priority is to ramp up customer acquisition and enhance the respective market ecosystems. For example, in the case of Bursa Carbon Exchange, we partnered with UEM Lestra Berhad and will be offering an Auction-as-a-Service solution, facilitating an open and competitive bidding process for renewable energy supply under the Corporate Renewable Energy Supply Scheme or the CRESS framework. Via efforts under our Sustainability Accelerator Programme, we anticipate Group 1, which are the larger PLCs, to be in a better state of readiness to deliver robust and credible sustainability and climate disclosures by the end of 2025. On the next slide, our headline KPIs. Moving on to the progress of meeting our headline KPIs for 2025. First half 2025 has indeed been challenging with concerns over trade tariffs, geopolitical tensions weighing on securities trading momentum and profit before tax. As highlighted earlier, although our securities trading revenue softened in first half 2025, this was buffered by a stronger revenue from derivatives, BSAS trading and nontrading revenue. While uncertainties are expected to remain, we are optimistic of better performance in the next few months. Key positives include strong cash position by fund managers looking for yield and attractive FBMKLCI valuation. And consensus expectation for FBMKLCI 2025 level is 1,664 versus the current levels of 1,530. Hence, there are also signs of optimism and upside potential. As for the nontrading revenue, we are on track to achieve growth of between 5% to 7% by year-end. Our IPO pipeline remains healthy. We are working towards achieving the targeted 60 IPOs and at least MYR 40.2 billion in total IPO market capitalization, assuming a potential sizable IPO, which is still in process comes through. As for the exchange-owned sustainability management, we are on track to achieve the targeted emissions reduction of at least 10% from the organization's baseline FY 2022 Scope 1 and 2 emissions. On the next slide, in terms of outlook, economic indicators. Looking ahead, economists are expecting softer global and Malaysian economic growth compared to estimates made at the beginning of the year. Other economic indicators such as government bond yield and ringgit remain resilient. Meanwhile, government remains committed to improving our fiscal deficit to ensure the country's longer-term sustainable growth. FBMKLCI's forward P/E ratio of 14.5x represents a discount to its 10-year average of 17.0x. Malaysia's mid- to long-term growth is supported by clear policies as the New Industrial Master Plan 2030, the National Energy Transition Road Map, the National Semiconductor Strategy and the Johor-Singapore Special Economic Zone. The realization of record approved investment amounting to MYR 378.5 billion is expected to translate into economic and corporate earnings growth going forward. This concludes my presentation for today. Thank you very much.

Thank you, Dato Fad'l and Puan Rasmona, for the presentations. Now we'll proceed to the Q&A session with our esteemed panelists. Please raise your hand if you have any questions and we'll pass the microphone over to you. [Operator Instructions] I wish to remind both physical and virtual attendees to please state your name and organization before you ask your questions. Dato Fad'l, the floor is now yours, and we invite questions from the floor.

Thank you. Let's open to questions. Yes?

I am [ John from DH ]. I just want to touch on your guidance. Are you maintaining your PBT guidance because analyst -- a few analysts already slashed your forecast. And if you are maintaining the guidance for growth, which area do you think is a key driver for the rest of the year?

Thank you. Thank you for the question. Yes, we're maintaining. And I think for us, at the end of the day, we have to go back to Malaysia's economic fundamentals. GDP growth 2025 and I think quite clearly yesterday it was already announced of 4% to 4.8%. Our KLCI clearly is trading at a discount of 17% to the 10-year average I have mentioned. We see clear, strong local liquidity from our investors, local investors, particularly. I understand that a lot of fund managers are holding cash. So we are -- data points are showing that as at May, there's about 11.5% cash held by fund managers and that's the highest since January 2024. And we hope to see greater level of trading activities once those cash are deployed. And I think also with the preemptive move undertaken by Bank Negara to reduce interest rates by 25 basis points, I think that also will bring in additional liquidity into the financial system. So on a valuation basis, and I think as we mentioned, we are in line with regional peers. And I think at 1,664 versus current level of 1,530 -- 1,664 consensus versus 1,530 target levels where we are today, 1,530, that clearly they are upside. So we're remaining where we are. And I think in terms of what we are seeing, what are the areas that we hope to be able to push, I think, quite clearly, we see revenues continue to remain strong from our derivatives, our BSAS trading and also the nontrading revenues. So I think for me, going forward, it is important that we also cushion the volatility of ADVs. So going forward, I would be looking at targeting, say, the next 3 years, double-digit growth for our nontrading businesses, nontrading revenues. So I think that's how we look at it. Thank you. Any other questions?

Sorry, it's me again. So earlier of the year, there were talks about the SC fee hike in levy. Is that going to implement? And has that affected the trading volume -- trading interest in Bursa Malaysia? So it's more like the global phenomenon...

Yes. So I think that's still -- we're still engaging with the SC on this matter, so a bit premature, yes. A bit early, yes.

And I just want to touch on the IPO. So I observed a few big-sized IPOs, they have exemptions on the public float requirement. On one hand, you are saying you want a liquidity provider, while on the other hand, you allowed certain big-sized IPOs to have less than 25% public float. Can you just shed some light on this?

I think for exemptions, it's on a very case-by-case basis. And I think there are very set criteria internally that is looked at by ourselves and also the Securities Commission in terms of the float. But I think -- I don't know whether you want to take that question? Can I hand over to my CRO, our Chief Regulatory Officer, Julian, to expand on the criteria that we look at. That will be good.

Thanks, Dato Fad'l. So the criteria are quite set as Dato Fad'l just mentioned. It's market cap driven. So any market cap that's above MYR 3 billion, you are then entitled to a lower market capitalization, the public spread itself. So we actually have it written, and it's actually a hard coded in our rules. So the concept behind it is basically looking at percentage of market capitalization. So a percentage of a larger market cap will still meet the necessary public float itself.

Sorry, you have another question.

I still got some. Sorry. I just want to touch on the Bursa hacking incident that happened in April 24. So I believe forensic investigation has been done. So can you share like what specific vulnerabilities were exploited? Is it from the broker side?