Aditya Birla Money has come out with its report on Multi Commodity Exchange (MCX) IPO. According to the research firm, it is a good investment opportunity to investors as company has strong parentage, good business model and robust growth prospects.
Aditya Birla Money has come out with its report on Multi Commodity Exchange (MCX) - IPO. As per the research firm considering the company’s strong parentage, good business model and robust growth prospects, it is a good investment opportunity to investors.
MCX is the leading commodities exchange in India based on value of commodity futures contracts traded with a market share of more than 80.0%. It is a de-mutualised exchange and received permanent recognition from the Government of India on September 26, 2003, to facilitate nationwide online trading, clearing and settlement operations of commodities futures transactions. The company offers trading in 49 commodity futures based on contract specifications, from a diverse range of classes including bullion, ferrous and non-ferrous metals, energy and agriculture. MCX is the fifth largest commodity futures exchange globally (FIA survey) in terms of the number of contracts traded for the six months ended June 30, 2011. As of December 31, 2011, the company had 2,153 members nationwide with more than 296,000 terminals including CTCL spread over 1,572 cities and towns in India. The offer has been graded 5/5 by CRISIL, indicating strong fundamentals.
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.
We believe this issue being the first quality issue post major IPO flops, is likely to receive overwhelming response. MCX which is still in the growth phase has carved out and demonstrated a robust business model. The company’s leadership position with 87.0% market share together with experienced management team and stable earning profile bodes well for its future growth.
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.
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To read the full report click here
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