ASX Limited

ASX Details

ASX Limited (ASX: ASX) is the top-10 global exchange which is engaged in offering the broad range of financial market services throughout multiple asset classes.

Result Performance (Half-Year Ended 31 December 2020 – H1FY21):

The company’s operating revenue for the interim period stood at $470.5 million, as compared to $454.9 million in the previous corresponding period (pcp). There was a decline in net profit which was reported at $241.8 million in H1FY21 as compared with $250.4 million in H1FY20, due to lower interest earnings. The company declared lower interim dividend which was in line with the reduced NPAT.

Key Data (Source: Company Reports)

Recent Update:

Recently, the company provided update for its June month, wherein, it highlighted that total capital raised was $16.1 billion, down 38% on the previous corresponding period (pcp). New listed entities admitted in the month stood at 24, as compared to 3 in June 2020 month.

Outlook:

The company stated that deploying towards technology supports core as well as strategic initiatives. Its main FY 2021 initiatives include strengthening resilience, expanding capacity as well as increasing digitisation.

Key Risks:

The company provides financial services such as cash market exchange, derivatives exchange, and depository services. Thus, any non- compliance of regulatory guidelines may result in financial losses for the company. The company is exposed to pandemic situation, which may lead to lower volumes on the exchange, leading to decline in business.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

Following the previous two weeks of lower closing, the stock opened higher on the first trading session of the ongoing week but could not hold on to the momentum, and finally gave a softer close for the week at $25.18. The technical indicator RSI with a reading around 51 and a flattish curve at the end, suggests flattening of bullish momentum for the stock.

Going forward, the stock may have resistance around the 50% retracement level of $77.23 whereas support could be around 20 periods SMA of $73.60.

Stock Recommendation:

The company’s EBITDA margin and net margin for H1FY21 stood at 75.0% and 47.6%, better than the industry median of 55.3% and 25.0%, respectively implying decent fundamentals. ROE for H1FY21 stood at 6.5%, better than the industry median of 4.4%, implying that the company generated better return for its shareholders than its peer group.

We have applied P/E based relative valuation (on an illustrative basis) and the target price reflects a rise of low double-digit (in % terms). We have applied a premium to Price/EPS Multiple (NTM) (Peer Average) considering improvement in cash position as well as better EBITDA margin.  

Considering the aforesaid facts, and current trading levels, we give “Buy” recommendation on the stock at the current market price of $75.180 per share, down by 0.477% as on July 12, 2021.

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.

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