Moscow Exchange - Take a Pause; Cut to HOLD

Moscow Exchange's shares have performed very well in 2019 (+65% total dollar return versus +52% for the RTS), helped by a year-end rally. Yet it has been a pretty challenging year operationally, with flat earnings growth on the back of material provisions. We hope that under a new CEO and armed with a new strategy, the company can leave prior missteps behind. Next year nevertheless looks set to be tough again for earnings - we see a 3% decline, adjusted for provisions - driven by the falling interest rate environment pushing down NII, fee income growth of around 10% and a mild pickup in cost growth. On the positive side, the stock could be supported by rising multiples for exchanges, the prospect of further dividend yield compression and the company's relatively stable and defensive characteristics. Since we upgraded to a BUY in July, the stock has risen almost 20% and comfortably outperformed the Russian index. We think after the recent leg-up, it's a good time to pause for breath, and we cut our recommendation to HOLD, raising our target price to R119 per share (from R112).