Strong first-half performance

The International Stock Exchange (TISE) had a strong first half to 2023, with revenue +7% to £5.2m and fully diluted EPS +17% to 83p, against a backdrop of subdued financial markets. The performance demonstrated the resilience of the business with the strength of the repeating annual listing fees. Our forecasts are largely unchanged, but we have raised our valuation range: we have lowered the discount rate we apply to reflect the consistency of returns, which have proved stronger than we first anticipated.

• 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 company has expanded the active membership of the Exchange, notably in Ireland and, most recently, Bermuda. It is looking to win a higher share of bond listings. It has also recently established a private markets service for 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 £74m, or 2,477p per share, fully diluted, with a range of £60m to £91m.
• Key risk: The risks from rule changes initiated by the UK Treasury, and implemented in 2022, have been less severe than initially anticipated. 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 strength shown in 1H’23 demonstrates the resilience of the business model, in our view.