London Stock Exchange Group (LSEG)


PresentaciĂłn de resultados de LSE Group, con una buena subida de dividendo (+27%)


LSEG Posts 2021 Ahead of Our Expectations; Trading and Banking Progress Continues; FVE Increased

Wide-moat London Stock Exchange Group, or LSEG, reported adjusted earnings per share of 287 pence versus the 258 pence we had been expecting for full-year 2021. Performance was strong across the board, in particular with volatility around omicron and interest-rate expectations yielding better-than-expected results for the group. Progress was also on display in its data and analytics business, which we believe is encouraging. Overall, LSEG has delivered on its 2021 targets and already shows good momentum into this year. We have digested these good results and rolled our model one year forward, raising our fair value estimate to GBX 9,800 from GBX 9,200 per share. We believe shares in LSEG are attractive and investors looking for a wide-moat business with an Exemplary capital allocation rating should not look past this opportunity.

Underlying figures at constant scope and currency provide the clearest picture of LSEG’s performance after the large acquisition of Refinitiv and disposal of Borsa Italiana over the last year. Revenue at constant scope grew 0.7% as the group had to absorb the weaker GBP/USD exchange rate over the year. LSEG generates 60% of its revenue in U.S. dollars. Cleaned for the foreign-exchange impact, revenue grew 6.1%, ahead of our 4.5% estimate and in line with LSEG’s 5%-7% revenue CAGR target.

Fair Value and Profit Drivers

Our fair value estimate for London Stock Exchange group is GBX 9,800. We assume a 5% revenue CAGR in our explicit forecast period, driven primarily by LSEG’s data and analytics business. Within this segment, we anticipate an average annual revenue growth rate of 8% for the investment solutions business, which includes LSEG’s FTSE Russell business, benefiting from increasing demand for its index and benchmark products, as well as new products derived from Refinitiv’s data sets. We expect a more modest 4% growth rate in the enterprise data business, which is supported by the ongoing shift from active to passive management. The same trend is a headwind for LSEG’s trading and banking segment, however. We expect revenue to start growing this year albeit barely. Long-term prospects remain challenging in this segment but the rollout of Workspace is starting to show promising signs. Within capital markets, we expect growth to stem primarily from LSEG’s fixed income and derivative trading venue Tradeweb. We see this business growing at 7% on average per year as we expect demand for on-venue fixed income trading to increase. Growth within post-trade, driven primarily by LCH’s clearing business, will see continuous demand for swap clearing, while the last phases of the uncleared margin rule over the next two years should support growth in foreign-exchange derivatives clearing. Including Refinitiv integration costs and synergies, we expect costs to increase by about 2% on average throughout our explicit forecast period. In combination with our revenue assumptions, we expect this to translate into a roughly 6% adjusted EBITDA margin expansion to 54% by 2026. Our weighted average cost of capital for LSEG is 7.1%