Strong growth in 2021 continues into 2022

The International Stock Exchange (TISE) had a very strong 2021: revenues were up 19% and profit before tax was up 29%, driven by an increase in listings. These figures were in line with our expectations. A 200p special dividend was declared, in addition to the 80p paid during the year. The first quarter of 2022 has started well, with a record number of new listings. Our forecasts are broadly unchanged, with slightly higher-than-expected listing volumes largely offset by higher costs.

• 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: Management is pursuing multiple avenues of additional revenues, which will be detailed in this note: bond expansions, sustainable finance, a new trading system and private markets.
• Valuation: There are no directly comparable listed exchanges with a comparable business model (other listed exchanges have earning 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 £74m, or ca.2,500p per share, fully diluted.
• Risks: The risk from rule changes initiated by the UK Treasury and implemented in 2022 seems to be less severe than initially anticipated – the definition of who may qualify for the new UK ruling may prove too narrow or complex. In addition, TISE’s reputation for probity is important for attracting listings and approval from various international bodies. Its own shares are illiquid.
• Investment summary: TISE aims to expand its customer base and build on its growth record. With a strong track record and robust balance sheet, we believe TISE is well-placed to diversify its revenues and continue to trade very profitably.