Compagnie Financière Tradition : Building beyond the market cycle
We are initiating coverage of Compagnie Financière Tradition (CFT) with a Neutral rating and target price of CHF 314. As one of the world's three leading interdealer brokers (IDB), CFT plays a crucial role in the market infrastructure. The simple IDB business model offers significant operating leverage and is characterized by transacted notional in hundreds of USD trillion at low commission fee. We expect 5.5% revenue and 10% operating profit CAGR over 2025-2027e, excluding inorganic growth, which is the wild card. The company offers a solid balance sheet and a strong cash generation which should support a sustainable return to shareholders. However, at the current share price, we see these strong fundamentals and prospects largely priced in. Our target price is based on a peer comparison (18x in P/E 26e) and a DCF model (8.6% COE).Compagnie Financiere Tradition is a holding company. Through its subsidiaries, Co. is engaged in the brokerage business. Co. provides brokerage services in a range of financial and commodity-related markets. The financial markets Co. covers include money markets, interest rate and currency derivatives, equities and equity derivatives, bonds and repurchase agreements, and credit derivatives. Co.'s commodity-related markets include derivatives in oil, natural gas, power, coal, freight, weather, emissions, precious metals, pulp and paper, and property. Co. is a member of several exchanges, operating in both exchange-traded and over-the-counter markets.
Oddo Securities provides securities brokerage and research services. The company offers equity, economic, and derivatives research and credit analysis services. It focuses on insurance, automotive, building materials, pharmaceuticals, telecommunications, information technology, and agri-food industries.
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