MOSL: BSE (Buy)-PAT dragged by market volumes-one-time expenses; Star MF could possibly move the needle
BSE: PAT dragged by market volumes; one-time expenses; Star MF could possibly move the needle
(BSE IN, Mkt Cap USD0.4b, CMP INR588, TP INR750, 28% Upside, Buy)
- Below estimate on low transaction charges: BSE’s 3QFY19 consolidated operating revenues declined 22% YoY to INR1.02b, below our estimate of INR1.07b. The miss was on account of lower-than-expected transaction charges. EBITDA at -INR93m was below our estimate of INR93m, but included one-time charges totaling INR120m from (a) provision for investment in IL&FS (INR70m), and (b) provision in Settlement Guarantee Fund (INR50m). Adjusting for these, EBITDA would have come at INR26m. PAT came in at INR449m (-23% YoY), 7.2% above estimate explained by one-off in tax (ETR 4.6% v/s est. of 20%).
- Market cycle affecting revenues: During the quarter, equity cash transactions fell 60% YoY to INR170m, owing to the prevailing market conditions. 9MFY19 revenues are down 5% and the same is the case for Book building services too, down 71% YoY to INR40m. Annual listing fees (annuity in nature) were flat at INR454m. While others declined, StAR MF continued gaining traction, growing 8% sequentially to INR77m.
- Valuation view: BSE has been focused on scaling new segments, which should continue driving growth in earnings, notwithstanding the cycles. We value BSE on an SOTP-basis ascribing value to (a) core operations ex-cash income (INR120/share), (b) implied value from CDSL’s market price @20% holding company discount (INR80/share), (c) owned and unencumbered cash (INR275/share), and (d) float income from encumbered/margin money (INR2,750/share). Our target price of INR750 implies a 28% upside. Maintain Buy.
BSE Limited (BSE) is an India-based stock exchange company. BSE provides a transparent market for trading in equity, debt instruments, derivatives and mutual funds. The Company consists of two business segments: Stock Exchange activity and Depository activity. Stock exchange activity is engaged in facilitating trading of securities and the activities incidental there to, and Depository activity provides depository-related services. It also has a platform for trading in equities of small and medium enterprises (SME). BSE also provides various services to capital market participants, including risk management, clearing, settlement, market data services and education. The Company's subsidiaries include Marketplace Technologies Private Limited, Central Depository Services (India) Limited (CDSL), Indian Clearing Corporation Limited (ICCL) and CDSL Ventures Limited. The Company offers the SCORES system, which is a Web based system where investors can lodge their complaints online.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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