Resilient performance in difficult year

The International Stock Exchange (TISE) showed a resilient 2022 performance in tough conditions, with revenue flat, at £10m, and PBT down 13%, to £4.2m, driven by a fall in new listings and some cost inflation. During the year, a 200p special dividend was paid, in addition to the 80p ordinary dividend. The first quarter of 2023 was subdued, with new listings down possibly 30%, on our estimates. Our new forecasts reflect this slower start, with a pick-up in activity anticipated in the second half.

• 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 the second-largest market for UK REITs.
• Opportunities: The company has expanded the active membership of the Exchange, notably in Ireland, and is looking to win a higher share of bond listings. It is also establishing a private markets service for unlisted companies.
• Valuation: There are no directly comparable listed exchanges with a comparable business model (other listed exchanges have earnings models based on trade execution). We have used a DCF model, with a high, 14%, discount rate, to reflect the current regulatory uncertainties. Our derived central value is £61m, or 2,091p per share, fully diluted.
• Key risk: The risks from rule changes initiated by the UK Treasury, and implemented in 2022, were less severe than initially anticipated. However, the government continues to tweak the rules around the definition of who may qualify for the new UK ruling, to encourage a greater take-up of the new regime. If successful, this could eat into TISE’s core business.
• Investment summary: TISE aims to continue to expand its customer base and build on its growth record. With a strong track record, good cash generation and a robust balance sheet, we believe TISE is well-placed to diversify its revenues and continue to trade very profitably. The slowdown in 2022 (and at the start of 2023) was entirely a function of market conditions, in our view.