Motilal Oswal is bullish on Financial Tech and has recommended buy rating on the stock with a target of Rs 1370 in its February 5, 2013 research report.
“FTECH is a unique play on end-to-end presence in the ecosystem of stock exchanges. The company was incorporated as a provider of technology solutions for the financial markets. It has forward integrated from being a trading technology solutions provider to a creator and operator of financial markets (nine exchanges) as well as complementary ecosystem ventures supporting these markets (Warehousing, Clearing, Info vending, Payment solutions etc.).”
“An Economic Moat protects a company's profits from being attacked by a combination of multiple business forces. Exchanges globally have been winnertakes- all businesses, with minimal competition. Leading market share of multiple FTECH's exchanges and proven technology credence substantiate its capability of long term sustenance of its ventures. Forward integration from trading platform to exchanges to complementary ecosystem ventures facilitates a distinctive value proposition to customers, non-replicated in the market. MCX has cornered a monopolistic market share in commodity exchanges. Supply of technology platform by its parent, FTECH gives MCX a competitive edge. FTECH has been setting / scaling up multiple other exchanges that span across asset classes and geographies, which can map MCX's success. Potential opportunities at MCX-SX and SMX are even higher than that at MCX.”
“We value FTECH's businesses by dividing them into: [1] Base value, coming from sizably scaled Technology business (INR543/share) and MCX (INR500/share including value of warrants in MCX-SX held by MCX), and [2] Option value - from other ventures such as MCX-SX, IEX, NSEL and SMX (applying a multiple to nascent base of current financials). We see three potential upside triggers to the stock in the near term: [1] Passage of FCRA bill, [2] stake sale in IEX (to bring holding down from 33% to 26%) and [3] Volumes performance at MCX-SX post launch on February 9th. We recommend Buy, with SOTP based target price of INR 1370,” says Motilal Oswal research report.
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