BURSA MALAYSIA BHD (BURSA)

BURSA MALAYSIA BHD (BURSA) All figures in thousands of Ringgit Malaysia except per share values and ratios Analysis Date: Financial Year: 2012 31/12/2012 Latest Quarter: 31/12/2012 Price: 8.17 Stock Category: Large Capital Growing Overview Bursa Malaysia Berhad, an exchange holding company, provides exchange-related services in Malaysia. The company operates an integrated exchange that offers a range of exchange-related services, including trading, clearing, settlement, and depository services. Its products and services include equities, derivatives, Islamic offerings, offshore services, bonds, indices, information products, investment knowledge hub, central depository system accounts, consolidated central depository system statement of accounts, and securities borrowing and lending. The company also operates and maintains securities, derivatives, futures, options, and offshore financial exchanges; a clearing house for securities, derivatives, futures, and options exchanges; a central depository for securities listed on the securities exchange; an electronic trading platform for the bond market; and a Shari ah compliant commodity trading platform. In addition, it compiles, provides, and disseminates prices and other information relating to securities quoted on the securities and derivatives exchanges, as well as acts as a nominee for Bursa Malaysia Depository and receives securities on deposit or for safe-custody or management. The company was formerly known as Kuala Lumpur Stock Exchange Berhad and changed its name to Bursa Malaysia Berhad in April 2004. Bursa Malaysia Berhad was founded in 1973 and is based in Kuala Lumpur, Malaysia. Board: Main Board FBMKLCI: NO Industry: FINANCIALS Sub-Sector: STOCKBROKING AND RELATED SERVICES Ownership: Corporate Owned (Local) 19/07/2013 Institutional Holders Investment Strategy % Shares Owned: 36.74% Portfolio Strategy: Lump Sum + Top Up # of Holders: 43 Portfolio Execution: Buy and Monitor Total Shares Held: 195,673,254 3 Mo. Net Change: 11,012,855 Averaging Down Method: Dollar Cost/Value Averaging # New Positions: 4 # Closed Positions: 1 Basis for Buying & Selling: EPS # Increased Positions: 14 EY % OSCILLATOR # Reduced Positions: 5 Institutional Sponsorship Market Direction # Net Buyers: 9

Performance Weekly Chart (Full History) Price CAGR % 8% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 12.63% 5.19% 4.84% 0.00% 3-Y 5-Y 10-Y Full History Stock Versus Sector Peers Stock vs Sector Peers (Source: Reuters) 160.00% 140.00% 136.94% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% -20.00% 55.92% 37.13% 26.17% 0.00% Debt to Equity - 5Y Avg EPS - 5Y Growth Net Profit Margin - 5Y -8.25% Avg 16.88% 22.48% ROE - 5Y Avg 13.74% Sales -4.61% - 5Y Growth Company Sector

ROE by Sector Peers (Source: EquitiesTracker) OSK BURSA APEX HLCAP HDBS TA KAF ECM INSAS KENANGA NOMAD 3.11 1.30 0.98 0.66 6.21 5.85 7.23 9.78 9.61 17.30 38.65 0 5 10 15 20 25 30 35 40 45 Market Cap by Sector Peers (Source: EquitiesTracker) BURSA OSK HLCAP TA HDBS ECM KENANGA INSAS APEX KAF NOMAD 1,657.09 1,493.72 1,215.46 1,020.64 696.21 461.01 374.40 256.28 207.60 177.34 4,348.68 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 PE by Sector Peers (Source: EquitiesTracker) NOMAD KENANGA HLCAP INSAS BURSA ECM KAF HDBS TA APEX OSK 1.75 15.31 15.27 12.24 9.84 22.11 30.00 28.67 40.33 63.00 79.50 0 10 20 30 40 50 60 70 80 90

Key Ratios Measures 2004/12/31 2005/12/31 2006/12/31 2007/12/31 2008/12/31 2009/12/31 2010/12/31 2011/12/31 2012/12/31 5-Y WA. 3-Y WA. 10-Y GR. 5-Y GR. 3-Y GR. Sparkline Grade Sustainable Competitive Adv. Consistent and increasing ROE 2.43% 9.21% 13.36% 30.84% 14.26% 21.14% 13.26% 16.99% 17.30% 16.82% 16.45% 1.68% 13.29% (Pref. 15%) Consistent and increasing ROIC 7.26% 8.43% 17.18% 51.92% 33.01% 26.85% 28.71% 40.25% 47.11% 39.52% 41.51% 11.16% 24.76% (Pref. 15%) Increasing Net Profit Margin (Pref. 37.94% 62.10% 59.51% 71.98% 50.16% 73.64% 49.44% 54.05% 55.61% 55.84% 53.97% -1.03% 5.88% 10%) Healthy Cash Flow Consistent and increasing CROIC 23.24% 90.54% 77.02% 130.13% 30.55% 36.25% 47.66% 47.75% 48.43% 45.56% -15.61% 13.78% (Pref. 15%) Increasing Free Cash Flow / Sales 55.95% 167.86% 66.17% 146.96% 41.24% 46.99% 48.00% 42.28% 49.93% 44.95% -23.40% -5.28% (Pref. 5%) Consistently decreasing (or negative) Cash Conversion Cycle Conservative Debt Increasing Debt Coverage Ratio 12050.74% 65448.41% 66791.57% 194812.33% (Pref. 150%) Increasing Quick Ratio (Pref. 100%) 450.26% 299.30% 168.52% 149.85% 133.65% 142.07% 155.95% 165.57% 138.55% 148.52% 150.26% 2.25% -5.91%

Growth Quality Column1 2004/12/31 2005/12/31 2006/12/31 2007/12/31 2008/12/31 2009/12/31 2010/12/31 2011/12/31 2012/12/31 Revenue % 167317 189338 256940 443148 290307 297625 331251 381321 388480 Year over Year 13.16% 35.70% 72.47% -34.49% 2.52% 11.30% 15.12% 1.88% 3-Y Avg. 21.45% 42.52% 6.10% -19.90% 6.60% 12.39% 7.97% 5-Y Avg. 19.52% 10.27% 1.10% -1.69% 8.30% 10-Y Avg. EBIT % 63636 53366 113681 270804 146262 143831 164368 206113 216032 Year over Year -16.14% 113.02% 138.21% -45.99% -1.66% 14.28% 25.40% 4.81% 3-Y Avg. 29.01% 81.21% 12.60% -31.64% 5.84% 17.99% 13.67% 5-Y Avg. 32.89% 22.35% 1.05% -4.29% 11.40% 10-Y Avg. Net Income % 35075 81339 108105 240625 104420 177588 113041 146160 151458 Year over Year 131.90% 32.91% 122.58% -56.60% 70.07% -36.35% 29.30% 3.62% 3-Y Avg. 56.28% 54.23% -1.73% -15.19% 3.97% -9.74% 14.63% 5-Y Avg. 32.66% 15.27% -2.14% -9.18% 5.49% 10-Y Avg. EPS % 0.2036 0.336 0.418 0.922 0.398 0.674 0.426 0.55 0.57 Year over Year 65.03% 24.40% 120.57% -56.83% 69.35% -36.80% 29.11% 3.64% 3-Y Avg. 35.97% 50.47% -2.45% -15.67% 3.40% -10.17% 14.56% 5-Y Avg. 23.50% 13.43% -2.75% -9.65% 5.15% 10-Y Avg. Cash From Ops. % -17800 62968 417126 322607 420789 118823 149285 176951 165014 Year over Year 807680.00% 438.43% -21.73% 28.84% -68.85% 22.29% 16.56% -6.13% 3-Y Avg. 534.02% 71.92% 0.42% -45.64% -48.25% 17.72% 4.50% 5-Y Avg. 228.16% 10.60% -28.26% -20.82% -13.96% 10-Y Avg. Free Cash Flow % N/A 105926 431305 293215 426639 122726 155644 183042 164230 Year over Year 307.18% -32.02% 45.50% -71.23% 26.82% 17.60% -10.28% 3-Y Avg. 50.91% -0.54% -43.55% -50.42% 19.99% 2.68% 5-Y Avg. 2.84% -29.09% -19.51% -15.10% 10-Y Avg.

Growth Quality 500,000 500,000 450,000 450,000 400,000 400,000 350,000 300,000 350,000 300,000 250,000 250,000 200,000 200,000 150,000 150,000 100,000 100,000 50,000 50,000 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenue EBIT Net Income Cash From Ops. FCF -50,000

Economic Moats Cost Advantage - BURSA is the one and only stock exchange in Malaysia. So, BURSA got 100% domination in the market. BURSA set the rules - Like it or not, just live with BURSA. Switching Costs - The more people trading, the more money BURSA make. Just that simple Network Effect Not available or no moat found Intangible Assets Efficient Scale - BURSA is the one and only stock exchange in Malaysia. So, BURSA got 100% domination in the market. BURSA set the rules Reference: http://www.cfapubs.org/doi/pdf/10.2469/cp.v30.n2.9

Red Flags in Financial Statement Column1 2004/12/31 2005/12/31 2006/12/31 2007/12/31 2008/12/31 2009/12/31 2010/12/31 2011/12/31 2012/12/31 Revenue 167,317 189,338 256,940 443,148 290,307 297,625 331,251 381,321 388,480 YoY Changes 22,021 67,602 186,208-152,841 7,318 33,626 50,070 7,159 YoY % 13.16% 35.70% 72.47% -34.49% 2.52% 11.30% 15.12% 1.88% A/R 71,437 72,292 50,867 40,733 48,297 44,046 48,309 41,190 48,839 YoY Changes 855-21,425-10,134 7,564-4,251 4,263-7,119 7,649 YoY % 1.20% -29.64% -19.92% 18.57% -8.80% 9.68% -14.74% 18.57% Cash Conversion Cycle N/A N/A N/A N/A N/A N/A N/A N/A N/A YoY Changes YoY % Days In Inventory N/A N/A N/A N/A N/A N/A N/A N/A N/A YoY % Cash From Ops. -17,800 62,968 417,126 322,607 420,789 118,823 149,285 176,951 165,014 YoY % 807680.00% 438.43% -21.73% 28.84% -68.85% 22.29% 16.56% -6.13%

Red Flag Created Date Comments A/R increases much faster than booking sales 19/07/2013 The condition is not serious. From 2007 onwards, BURSA's A/R range from 40,000 to 48,000.

EY% OSCILLATOR CALCULATOR High EY% Price ($) Low Green Zone EY% 5.14% Green Zone Price($) RM6.06 4.92% Buy Under RM6.33 10% Trading Range 2.27% 3.10% Sell Above RM10.04 10% Red Zone EY% 2.88% Red Zone Price($) RM10.83 Low High

EPS QoQ Growth EPS QoQ Growth: 45.07% 0.12 0.1030 0.10 0.08 0.0760 0.0670 0.0730 0.0770 0.0710 0.0700 0.0670 0.0720 0.06 0.0520 0.0560 0.0590 0.04 0.02 0.00 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13

Notes Created Date Note Type Source Type 23/04/2013 The reason I do not use DCF is FCF growth of BURSA is inconsistent. Besides, EPS growth is also very Note - inconsistent, so I do not use Absolute P/E. However, the good thing is its EPS always move in a preditable range, so it is good to use EY % Oscillator. 23/04/2013 Today, I have sold off some BURSA shares to grab some profits. Note - 23/04/2013 In the previous analysis, CROIC and ROIC was positive, which is not correct. This is because I didn't minus excess cash. In this analysis, I have corrected the formula. For Bursa, I don't see negative CROIC and ROIC as a bad thing because BURSA got huge reserved cash and BURSA doesn't need much cash to generate revenue. Basically, whoever performs transactions in market will automatically contribute some money to BURSA. 23/04/2013 1Q13 result in line; net profit grew 7% q-o-q led by strong trading values in equities and derivatives. Securities trading volumes and velocity were weak; current momentum may not be sustainable. Note - Note Analyst Report 01/04/2013 In terms of profitability, I see some growth in the past 5 years, but the growth rate is not impressive. Note - Besides, ROIC is still negative even if it has been improving for the past 5 years. Besides, there is no growth in cash flow as well. Based on DCF s best scenario analysis, BURSA is very close to the fair value (7.25). Last year, I have sold around 35% of BURSA. I will sell off all of my positions in the next few months gradually. 04/02/2013 Key potential upside risks to our TP include: Risk Analyst Report (1) a compression in risk premiums, (2) further pick-up in velocity, (3) stronger-than-expected improvement in the derivatives market, (4) further improvement in retail sentiments, and (5) return of foreign investors in full swing. http://eresearch.bursamalaysia.com/download.aspx?id=13838&type=research 04/02/2013 We are positive on Bursa s outlook due to the various strategies and initiatives in place to build a more vibrant trading environment and competitive market place by: Outlook Analyst Report 1) facilitating more tradable alternatives, 2) reshape market structure and framework by liberalising the Derivatives market membership structure, and 3) broaden regional trades via ASEAN Exchanges & ASEAN Link. These efforts in place should help bolster interests and boost trading activities especially among foreign participants. http://eresearch.bursamalaysia.com/download.aspx?id=13838&type=research