Aust Securities Exchange: March trading statistics

About the author:

Author name:

By Steven Sassine

Job title:

Associate Analyst

Date posted:

07 April 2022, 8:30 AM

Sectors Covered:

Diversified Financials

• Aust Securities Exchange (ASX:ASX) released its monthly trading activity report for March 2022.
• Broadly, we would consider ASX’s March trading statistics as relatively soft, with Futures and IPO/Secondary volumes weaker on pcp. Cash Market volumes were the bright spot, driven by recent volatility, up ~21% on pcp.
• We marginally lower our FY22F/FY23F EPS by -0.7%/-0.8%, reflecting minor earnings adjustments post the recent trading data. Our price target is largely unchanged at (login to view) with the earnings changes offset to a degree by a roll-forward in our DCF.
• Whilst we continue to acknowledge ASX as a stable, quality franchise, its current trading multiple of ~33x FY22F PE remains quite full in our view given its low-to-mid-single EPS growth profile. We retain our reduce recommendation and continue to look for a more attractive entry point.

Broadly softer trends overall, but cash trading volumes the highlight

We view ASX’s March trading statistics as generally softer overall. Elevated volatility has led to a stronger cash market volume performance, up 21% on pcp and +11% on the sequential month. For the quarter, volume was up 27% on pcp.

This was offset by a weaker primary and secondary raising environment (down 21% and 18% on pcp respectively). For the quarter however, total capital raised was up ~106% sequentially (noting this includes the large February “other” capital/scrip-for-scrip result due to the unification of BHP’s corporate structure).

Futures volumes remain somewhat subdued, down 9% on pcp. With February being down 22%, 4 out of the 5 previous months have shown negative pcp growth for the Futures business.

Other points to note: 1) Total cash market value (~A$201bn) was up ~26% on pcp, with the total average daily value also up ~26% on pcp at ~A$8.75bn (with a considerable ramp up seen this quarter).

CHESS replacement likely delayed

With the Industry Test Environment (ITE1) live as of Nov-21, the next scheduled software release was due this month. However, per ASX’s recent project update, this has been postponed until July this year, with accreditation and migration “dress rehearsals” due to commence after that.

With the DLT go-live scheduled for April-23, these delays are likely to push back the launch, with ASX commentary stating that there is a “strong likelihood of delay to the go-live date”.

The delay is clearly disappointing in our view, particularly when framed against the further push back in potential revenue adjacencies from the new technology.

Changes to forecasts and Investment view

We marginally lower our EPS forecasts over FY22F/FY23F by -0.7%/-0.8%, reflecting minor earnings adjustments following the recent trading statistics release. Our price target remains largely unchanged at (login to view), with the earnings changes offset to a degree by a roll-forward in our DCF.

We acknowledge ASX as a quality franchise, however we view its current trading multiple of ~33x FY22F PE as quite full given its low-to-mid single digit EPS growth profile. We retain our reduce recommendation and continue to look for a more attractive entry point into the name.

Risks

Key upside risks to our recommendation include: a continued large improvement in trading activity levels; a global macro improvement; earlier revenue generation from adjacencies than anticipated and any unforeseen revenue opportunities from the recent new technology projects once they are rolled out (e.g. DLT).

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