ASX: Interim result 2014

Given the red hot float market over the past few months, there are no prizes for guessing the standout performer in ASX’s interim result. The real surprise was to see such a broad-based top-line performance, with revenue growth of more than 5% in each its divisions, driven by a combination of improved sentiment and new products.

Listings and issuer services led the way, with revenues up 11% over the prior period to $82m. There were 69 floats in the period, up from 41 the year before, with a total of $17.8bn raised, up from $3.7bn. The secondary market (money raised by companies already listed) was weak, however, with only $18.9bn raised compared to $22.5bn.

During the conference call, chief executive Elmer Funke Kupper drew particular attention to 'mFund', a new managed fund service that received regulatory approval during the half and will launch during the current half. Funke Kupper expects it to be a 'game changer' for the way people subscribe for and redeem units in managed funds.

Cash Market revenues rose 8% to $59m, with trading revenue up 5%, clearing revenue up 10% and settlement revenues up 8%. The improvement mostly reflected higher trading activity as a result of increased market confidence. The average number of daily trades rose 22% to 720,000, while the average value per trade fell only 14% to $5,469, to give an overall 5% increase in the average daily value traded to $3.9bn.

Information Services enjoyed an 11% rise to $34m, thanks to increased usage as well as price rises introduced on 1 July, while Technical Services revenue rose 7% to $26m.

New initiatives

Derivatives revenues rose 6% to $100m thanks to a 14% increase in futures and options contract volumes to 59m, helped by new products, such as VIX (volatility index) and sector futures and ‘over-the-counter’ (OTC) interest rate swaps clearing. ASX now has eight OTC clearing participants following the launch of its service last July.

Austraclear revenues rose 7% to $21m, with a 16% rise in Registry revenue contributing most of the gains. ASX Collateral has got started, enabling 12 ‘foundation customers’ to use their Austraclear collateral for transactions with ASX or with each other. Seven of them have apparently so far used the service to complete trades in the past couple of months.

These new initiatives also fed into increased staff costs, however, which rose 9% to $47m thanks to a 4% increase in full-time equivalent employees to 532. Total costs rose 8% to $77m.

Good value

Dividends from IRESS were steady at $3.3m, while net interest rose 42% to $31m due to increased interest on the company’s own cash following last year’s rights issue. All up, net profit rose 11% to $190m, although earnings per share only increased 2% to 98.3 cents due to the higher number of shares on issue. A fully franked interim dividend of 88.2 cents (ex date 3 Mar) was declared, up from 87.9 cents last time.

All things being equal, earnings per share of $1.98 are expected for the full year. With the stock down slightly since ASX price guides raised on 27 Nov 13 (Buy – $37.49), it's trading on a price-earnings multiple of 19 alongside its fully franked dividend yield of 4.9%. That’s good value for such a high-quality business, with plenty of opportunities for growth to offset the competitive pressures on its Cash Market operation. BUY.

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