BURSA: Earnings Exceed Expectations on Cost Efficiencies, Target Price Lifted
| Key Information | Details |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The company reported a 3Q25 net profit of MYR63.8 million, marking a 12% increase quarter-on-quarter (QoQ) but a 26% decline year-on-year (YoY). For the nine-month period (9M25), net profit stood at MYR189.3 million, down 22% YoY. These results aligned well with both the investment bank’s and consensus full-year projections, forming 73% and 72% respectively.
The sequential rebound in 3Q25 net profit was primarily driven by a 13% QoQ rise in securities trading revenue, which mirrored an 18% QoQ increase in average daily value (SADV). Crucially, operating expenses decreased due to lower staff cost provisions, highlighting effective cost management and contributing significantly to the earnings beat.
Operational Challenges and Mitigation
Despite the strong sequential performance, the 9M25 revenue saw a 10% YoY decline, largely attributed to a 25% drop in securities trading revenue. This was partially mitigated by growth in other revenue streams. The company faced headwinds from softer market utilization, with 9M25 SADV decreasing 26% YoY, though 3Q25 SADV recorded a sequential rebound to MYR2.82 billion.
Looking ahead, new regulatory fees pose a challenge. Effective January 1, 2026, the company will pay an annual fixed regulatory fee of MYR28 million to the Securities Commission (SC), alongside a 37.5% levy on derivatives revenue, capped at MYR35 million for 2026 and MYR40 million for 2027. To offset these new costs, the company has proactively raised selected listing and regulatory-related fees, which are expected to generate an additional MYR28-34 million in annual revenue. Further cost containment measures, including seeking reimbursements from the Capital Market Development Fund, are also being pursued.
Future Outlook and Strategic Adjustments
The company maintains its target of 60 IPOs for 2025, having achieved 41 by 9M25. However, the IPO market capitalization target has been revised downwards to MYR25.2 billion from the previous MYR40.2 billion, primarily due to the postponement of a large-cap IPO to 2026. Similarly, the Pre-Tax Profit (PBT) target range has been adjusted to MYR314-347 million from MYR369-408 million, falling slightly below the bank’s MYR353 million forecast for the year, which anticipates a stronger SADV rebound in 4Q25.
Investment Recommendation
Based on the company’s ability to exceed earnings forecasts through robust cost control and strategic adjustments to mitigate new regulatory costs, TA SECURITIES has issued a BUY recommendation. The target price has been set at RM0.25, indicating a potential upside of 25.0% from the last traded price of RM0.20.
