$24.80
-0.24 (-0.96%)
NYSE Euronext (NYX)
CAPS Rating:
A holding company that, through its subsidiaries, operate and regulate two securities exchanges: the NYSE and NYSE Arca, Inc. The Company is a provider of securities listing, trading and related information products and services.
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NYSE. When markets go bad, the market still makes a fee. There has been a dearth of IPOs in the past few years and when the current recession ends, both NYX and NASDAQ will explode with revenue. In the meantime, NYX has the volume to support revenues and has a steady stream of additional income as ETFs become more and more prevalent on the markets. All that and a dividend yield over 5%.
Although I like NYX, it is only because of Euronext, not the NYSE. Because forecasting future volumes and margins is difficult in this industry to competition and the impossible ability to forecast human action, I came out with an intrinsic value of 32-42$/ share. I did a basic DCF Valuation but broke it down by the sum of its parts. Using a 10% WACC, I got Euronext alone worth somewhere between 23-27 and Nyse worth 9-15$. My concern is that once the storm settles, those whole lost a lot of money in the market will be to traumatized to get back in, not to mention the lack of hedge fund trading (as a substantial ratio went bankrupt). I personally like ICE due to their strategic vision, execution and stellar management. I also like it given the fact is in operates internationally as opposed to CME group who is more domestically focused.
I'm more confident in ICE, and in particular the ability to hold their margins relative to NYX and NDAQ. This is because we will soon be entering the second leg of the commodity bull market, coupled with ICE'S entry into the CDS market and other agricultural products. I have sold Ice after more than doubling and know just hold the hong kong stock exchange which was selling for 40 HKD back in Nov. I believe China is the place where we will see increased trading volumes year after year and a new investor class arises. But who knows? - Good post
" I believe China is the place where we will see increased trading volumes year after year and a new investor class arises. But who knows? - Good post" Me, good post. IF so - speedybure, GREAT POST.
NYX is an active RB selection after AXP was bought. (I am a stroller for that service, not an analyst.) I have to say that I have followed NYX since 2005 and was slightly offput by the work to follow the revenue, as you have done. However, when NYX went under $20 per share - 1/3 less than it bought Archipaelego in 2005-06, I made the decision to buy. I do believe you are right about where revenue increases are likey to come from - however, as a fan of growth, I tend to look at the potential, the possible, and invest in that potential given the risk taken. NYX may very well go back under 20 then 10 as trading volume decreases and there are less markets to merge or buy into. But even in the market, brand still matters. And having the ability to have listed ETFs and new mutual funds etc. while the market reviles at IPOs will help maintain the brands NYX has and the revenue. Finally, I will state that alhtough hedge funds are down and out, all is not gone. Money will come back to the markets, if not in hedge funds, then through mutual funds. Although the corporate bond market will likely be the first beneficiary of that switch back to equity purchases in simple funds, ETFs, and single bond issuances - the risk is known, unlike the CDD/CMOs sold and bought and CDS'ed by institutions like AIG as well as hedge funds. So, I see a gradual return to traditional investments. Good for NYX.
I think China MAY see increased trading volume. The government has only recently allowed individual market trading, and given the lack of financial education - the public there is investing in the market as if they were in the Bucket Shops in the U.S. in the '90s - the 1890's. Although there is an abundance of capital, I don't know how that will be invested in China and by whom. It is within the interests of the Chinese government and economy to continue to invest in Western Bonds and business - after all if the money pumped out of the well is sent there, the well will run dry. Without investment in the west, that well will run dry.
Again, thanks for the response and the detail in your valuation work. I do think your valuation ignores the billions in revenue that a string of successful IPOs generate, not to mentiion more listings = more continuing trading and services revenue each and every quarter.