ASX Limited Share Trading Update

Submitted by Craig Strzelecki on 18 April, 2007 - 17:53

ASX Limited has a downgraded Neutral 2 broker call and a share price target of $50.80 from sharemarket analyst UBS. The company has released an update on cash market fees and rebates. The Australian Stock Exchange (ASX) has made minor reductions for crossed trade fees, but more substantive changes to its rebate structure moving to mgt's preferred "gain-share" model. Customers will get 75% (shareholders 25%) of cash market revenues above a likely 12.5% growth rate hurdle in 08E. Fee reductions are also offset by unchanged $ fee caps, meaning greater market value 'capture' in the fee structure. The impact of such changes is marginally EPS accretive in FY08E (~1%) according to the analyst. They see c1.3% 08E EPS accretion, noting that this outcome is entirely dependent on forecast turnover growth. The analyst also mark's to market on volumes. ASX's transactional revenues are potentially more defensive than the mkt appreciates. Outcomes neutral vs. 3-yr expectations. Specific hurdles for cash and futures rebates are likely to be announced in June, together with a more wholistic update on fees. The analyst sees potential for listing fee increases not captured in our forecasts. In addition incremental "mark to market" volume-driven upgrades are a further risk to their rating change. UBS values ASX Limited at a price target of $50.80 (DCF-based) with a Neutral 2 rating (was Buy 2). PT = DCF x (1+WACC) - dividends. Positives to ASX Limited: (1) mark to market upgrades (2) cost delivery (3) top line strength (4) ~$50m of rebates in 07E a cushion. Key risks for ASX Limited: (1) fee/rebate hurdle resets (2) cyclical mkts (3) potential capital drag in clearing. PT goes up from $46.30 to $50.80, but investment rating declines from Buy 2 to Neutral 2 following strong price performance.

ASX Limited is listed on the Australian Stock Exchange (ASX) under stock code ASX. You can view their investor website here. ASX was listed on the ASX on 14 October, 1998. Maurice Newman is the chairman of ASX while Robert George Elstone is the managing director. The company is the economic entity provides stock exchange and ancillary services in Australia. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade ASX. Check your charts and good luck with your share trading!

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