NZX Limited

Company Overview: NZX Limited (NZX: NZX) operates New Zealand securities, derivatives, and energy markets, including building and maintaining the infrastructure on which they operate. The company provides funds management services. The company’s segments include Markets, Funds Services, and Corporate.

NZX Limited

NZX Details

NZX Limited (NZX: NZX) operates New Zealand securities, derivatives and energy markets, including building and maintaining the infrastructure on which they operate. The company provides funds management services. The market capitalisation of the company stood at ~$442.864 million on 21^st March 2022.

Looking at the past performance over FY17 to FY21, NZX’s top line grew with a compounded annual growth rate (CAGR) of 9.2%. Total Revenue of the company improved from $67.49 million in FY 2018 to $87.96 million in FY 2021.

Exhibit 1: Financial Statistics

Source: Analysis by Kalkine Group

Result Performance for FY21 (For the Year Ended 31 December 2021)

• Net profit fell 14.6%: NZX reported a 14.6% decrease in net profit to $15.02 million, down from $17.59 million in FY20. The decrease was due to lower interest rates and higher depreciation and amortisation.
• Group operating earnings of $34.4 million: The group’s operating earnings stood at$34.4 million, and excluding acquisition costs of $35.8 Mn, they were up 4% YoY. Group revenues were up 12% to nearly $88 million for FY21.
• Operating margin of 40.7%: NZX delivered an operating margin of 40.7%, with increased investment across growth.
• The Board of Directors declared a final dividend of 3.1 cents per share, with a record date of 24 February 2022 and a payment date of 10 March 2022.
  

Exhibit 2: Financial Statistics

Source: Analysis by Kalkine Group

Top 10 Shareholders: 

The top 10 shareholders have been highlighted in the table, which together forms ~26.38% of the total shareholding.

Exhibit 3: Top 10 Shareholders

Source: Analysis by Kalkine Group

A Quick Look at Key Metrics: 

The company has posted ROE of 21.7% in FY 2021 as compared to industry median figure of 9%. Therefore, it could be said that NZX has delivered better returns to its shareholders in FY 2021 as compared to the broader industry. Its current ratio improved to 1.61x in FY 2021 as compared to 1.29x in FY 2020. This reflects that NZX is possessing decent liquidity position.

Exhibit 4: Key Metrics

Analysis by Kalkine Group

Recent Update:

• On 16 March 2022, NZX announced that it completed the retail shortfall bookbuild component of its underwritten 1 for 9 accelerated pro-rata renounceable entitlement offer. As a result, NZX has now completed its equity raising, as originally announced on 17 February 2022.

Outlook:

NZX is focusing on continuing to grow both the scale of its businesses and the synergies available between them, which it believes will result in a strong platform for future earnings growth. The cost of the investment in supporting growth escalated during FY 2021. The full effect would be felt in 2022 and earnings benefits could be witnessed from 2023.

The NZX Board expects operating earnings for FY22 to be in the range of $33.5 million to $38 million.

Risks:

The company is exposed to credit, market, and liquidity risk that arises in the normal course of the business. The company is also prone to foreign exchange risk. NZX operates in a highly regulated industry and must comply with stringent regulations.

Valuation Methodology: Price/Book Value Per Share Based Relative Valuation (Illustrative)

Technical Overview

Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Performance:

The stock has been valued using Price/Book Value Per Share based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to Price/BVPS Multiple (NTM) (Peer Average) considering the decent outlook as well as its CAPEX plans.

NZX is also pursuing the number of opportunities in order to grow the business that would be requiring investment in the coming year, under its strategy to develop the markets further as well as deliver greater value to NZX shareholders over the long term.

Considering the aforementioned facts and its current trading levels, we give a “Buy” recommendation on the stock at the closing market price of NZ$1.420 per share, up by 1.43% on 21st March 2022.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

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