Author Topic: MCX IPO Reviews + Recommendations  (Read 3233 times)

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MCX IPO Reviews + Recommendations
« on: February 17, 2012, 09:55:44 PM »
Here are the recommendations of MCX -  Multi Commodity Exchange of India Ltd  IPO

HSBC Analyst Hitesh Punjabi recommends,

MCX is the first exchange tapping the capital market in India. With descent financial performance and good industry prospects, the company looks to be a good investment to bet upon for long-term. MCX is valued at a P/E of 15.1x-18.1x on its annualized FY12 EPS of Rs 57.0 on a price band of Rs 860-Rs1032, respectively. There are no listed companies in India that are engaged in a business similar to MCX. However, on comparing with global players, the valuation looks attractive. We recommend our investors to Subscribe to the issue with a long-term view.

Nirmal Bang Analyst, Silky Jain wrote,

MCX shares is offered at 4.9x P/BV and 18.11x P/E calculated at higher band of price for 9MFY12 annualized EPS. We believe that the leadership position in the commodities industry with minimal competition, MCX will definitely command a premium multiple. Considering promoter’s position in the market, visible brand, better operational parameters & diversified portfolio, we expect MCX can command higher premium going ahead. Therefore, we recommend a “SUBSCRIBE”.

Sharekhan has the following Recommendation,

MCX does not have any direct competitors (of comparable size and business exposure) in the Indian listed space. Thus, we have compared it with global listed players in this space. At the lower and the upper end of the price band, the stock is offered at 15x and 18x its FY2012  annualised earnings respectively, that is around 10% to 30% premium to the average of its global peer valuation. The premium can be justified due to its higher growth prospects, relatively better return ratios and scarcity premium (lack of listed peers in the Indian market).

Anand Rathi Analysts, A.K. Prabhakar Shweta Prabhu C.A. Vivek Gujrati have the following recommendation,

At the higher end of the price band, MCX will trade at nearly 24x earnings for Dec 2011. The price-earnings (P-E) multiple at the lower end of the price band is 20x. The average P-E for exchanges globally is around 18x, but Asian exchanges trade at an average P-E of 25. The largest exchange in the world, CME Group Inc., which has a market capitalization nearly 20 times higher than MCX, has a P-E multiple of 11 and the Hong Kong Exchanges and Clearing Ltd, trades at 29x historical earnings.

Turnover on the bourse has risen at 46% CAGR between fiscal 2009 and fiscal 2011, the red herring prospectus shows. So considering the past performance of the company with the better outlook for the business and the valuations we recommend to SUBSCRIBE the issue.

Reliance Securities Analyst Jimit Doshi Recommends,

In view of the fact that MCX is the first of its kind to get listed on Indian stock exchanges and there are no domestic listed companies with a similar business model, we have compared the issue with a couple of international players. On doing so and keeping in mind the growth prospects of MCX vis-à-vis its global peers and the available market opportunity, we have arrived at the conclusion that the valuations at which  the MCX IPO offer is being made is attractive and would offer reasonable upside to investors over the medium-to-long-term. Thus, we  recommend a SUBSCRIBE to the issue.

CLSA has the following recommendation,

MCX dominates India's US$2.4tn worth of commodity exchange market with +80% share. Over FY07-11, MCX has delivered 33% Cagr in trading income led by expansion in member-base and rise in commodity prices. It is profitable, but earnings will be sensitive to price of key commodities. IPO values MCX at 15-18x FY12CL profit (annualised for 9MFY12). This is reasonable in context of its growth potential and valuation benchmarks. Regulatory framework will have an important bearing and MCX’s related party transactions are significant. Subscribe.

Aditya Birla Money has the following Recommendation,

At the upper price band of Rs 1032, the issue is reasonably priced at ~18.1x its pre issue and post issue EPS of Rs 56.98 (annualised 9MFY12 EPS). Assuming a reasonable growth of ~30.0% in FY13E (last three years average), the stock would be trading at ~13.9x its one year forward EPS. Currently most of the international exchanges trade at ~20xCY12 with low teen growth opportunity. Here the opportunity is very large and MCX is again market leader and is growing very fast. NSE was valued at ~21x, in a secondary share deal in December 2011.

Considering the company’s strong parentage, good business model and robust growth prospects, we believe it is a good investment opportunity and therefore recommend investors to SUBSCRIBE to the issue. Since there is no exchange in the listed space, MCX is likely to attract scarcity premium and Institutions mostly would be buyer post listing. Therefore the likelihood of listing gains is quite high. Investors could apply to this Issue both from listing gains as well as from a long term opportunity.

HDFC Sec has the following Recommendation,

India being one of the fast growing economies in the world could witness growing demand for commodities and in turn the volumes in
futures and options based on the underlying commodities could also see a steady rise. MCX holds a leadership position in the Indian
commodity futures market, with a share of 87.3% of the overall traded turnover in 9 months FY12. MCX is valued at a P/E of 15.1x-18.1x on its annualized FY12 EPS of Rs 57.0 on a price band of Rs 860-Rs1032, respectively. There are no listed companies in India that are engaged in a business similar to MCX. Compared with global players, the valuation seems reasonable given the company’s strong parentage, good business model and robust growth prospects. Further given the small issue size, demand from institutional players in the IPO and post-listing could be large.

ITI Financial Services has the following rating,

Since MCX is the first stock exchange in India to be listed, there’re no domestic comparables. Even at the upper end of the IPO price-band, the stock is available at a discount (P/E, P/B & P/S basis) relative to its global peers. At the upper-end of the price band, the stock is available at 17.7x annualized FY12 EPS, as compared to global average of 19x on CY12E earnings (comparable exchanges in terms of margins & growth trade at over 23x CY12 earnings). We recommend SUBSCRIBE to the IPO based on market dominance, strong ownership & superior corporate governance, scalable technological edge, new product opportunity and attractive valuations.

Way2Wealth Analyst Nisha Harchekar has the following review about MCX IPO,

At the offer price band of Rs 860 – 1,032, the issue is available at FY12E annualized P/E of 14.6-17.5x. If one assumes a 30% EPS growth for FY13, it would be trading at P/E of 12.2-14.6x which is at a discount to its global peers despite strong growth potential. Given the robust business model, strong growth prospects and strong balance sheet, the IPO price band looks reasonable. Investors can Subscribe to the issue at the upper price band.

Emkay Shares Analysts Aalok Shah and Prashant Kutty has the following views on MCX IPO,

We are enthused by MCX’s business model, ability to generate sustainable free cash flow and huge opportunity in a large untapped commodities market in India. In the recent past, we have observed that markets have attributed fancy valuations to unique and scalable business models (Jubilant Foods, Talwalkar, Mahindra Holidays) with multiple growth catalysts, sustainable cash flows and healthy return ratios. Although MCX is seemingly unique in its own kind, the underlying justification, when compared with above models, remains intact. Valuations at FY12 P/e of 15-18x and Market Cap/OCF at 16-20x provides room for decent upside. SUBSCRIBE.

SPA Sec Sumit Duseja recommends to subscribe with the following note,

Globalization, deregulation, advances in technology and increasingly sophisticated market participants offer opportunities for expanding the Indian commodity futures markets. Company is poised well to capitalize on these opportunities and is expected to continue to generate high growth in future. Being a high growth, high margin, high cash business and almost monopolistic presence in the market, we believe this is one of the good businesses one should own. Also, on the valuation front, stock is available at 18.11x annualized FY12 EPS of INR 57, which we believe is reasonably priced considering its strong fundamentals. We recommend SUBSCRIBE to the issue.
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