Strong bounce back continues

The International Stock Exchange (TISE) had an excellent half year to June 2024: revenue was up 22% to £6.4m and fully diluted EPS +27% to 105p. The second interim dividend was raised 67% to 75p, reflecting the new, higher payout, dividend policy. The performance, once again, demonstrates the strength of the business, this time against a background of more active markets. We have raised our forecasts: 2024 EPS goes to 191p, from 182p; and 2025 to 232p from 219p. Our valuation range rises proportionately to £87m-£91m, with a central value of 3,000p per share.

• 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.
• Highlights: There was strength pretty much across the board, with new listings up 18% to 444; total listings are 4,371, with a market value of £708bn. TISE is bigger than ever. Listings growth was boosted by fee increases from Jan’24. We believe these are very sustainable as listing fees are a modest part of total listings cost.
• 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 £90m (up from £79m), or 3,000p per share, fully diluted, with a range of £87m-£91m.
• Key risk: The impact from rule changes initiated by the UK Treasury, and implemented in 2022, has been less severe than initially anticipated. Possible future regulatory changes in the UK or the EU pose the biggest potential threats to the competitiveness of TISE’s offering. Otherwise, the business, inevitably, is exposed to the health of financial markets generally.
• Investment summary: TISE continues to expand its customer base; with a strong track record, good cash generation and a robust balance sheet, we believe it is well-placed to diversify revenues and continue to trade profitably. The progress shown in 1H’24 demonstrates the strength of the business model, in our view. Investors will enjoy another significant interim dividend: 75p (XD 26 September).