The International Stock Exchange (TISE) had a very good year in 2023, with revenue up 9% to £10.8m and fully diluted EPS +18% to 170p, against a continued backdrop of subdued financial markets. Both figures were marginally ahead of our expectations. The performance, once again, demonstrates the resilience of the business with the strength of the repeating annual listing fees; since 2020, it has now paid out more in dividends than its then share price (650p). Our forecasts are largely unchanged, but we have raised our valuation range and added some 2025 projections.
- Strategy: TISE specialises in listings that are sought for technical reasons, typically to ensure tax advantages or lower costs, while still being on a recognised exchange. It is home to one of Europe’s leading professional bond markets, and is always looking to expand its range of products and geographical source of clients.
- Opportunities: The International Stock Exchange has expanded membership of the Exchange internationally. It is looking to win a higher share of bond listings and CLOs. It has also recently established a private markets service and onboarded its first client. TISE expects this innovative service to be highly attractive to unlisted companies.
- Valuation: There are no directly comparable listed exchanges with the same business model; other listed exchanges have earnings models based on trade execution and market data. We have used a DCF model, with a 12% discount rate, to reflect regulatory uncertainty. Our derived central value is £79m (up from £74m), or 2,704p per share, fully diluted, with a range of £74m to £81m.
- Key risk: The impact from rule changes initiated by the UK Treasury, and implemented in 2022, has been less severe than initially anticipated. Possible regulatory changes in the UK or the EU pose the biggest potential threats to the competitiveness of TISE’s offering. Otherwise, the business, inevitably, is exposed to the health of financial markets generally.
- Investment summary: The International Stock Exchange continues to expand its customer base; with a strong track record, good cash generation and a robust balance sheet, we believe it is well-placed to diversify revenues and continue to trade profitably. The strength shown in FY’23 demonstrates the resilience of the business model, in our view. Investors will enjoy another 200p special dividend (xd 4 April, pay 29 April).
