established: 1861, ASX code: ASX, homepage: www.asx.com.au

Overview
ASX Limited was established as separate state based exchanges in 1861. Today it is the primary securities exchange in Australia and one of the world’s top 10 listed exchange groups by market capitalization. In 2006 it expanded its reach by a merger with Sydney Future Exchange (SFE) and changed its name from Australian Stock Exchange to Australian Securities Exchange.

Analysis of 2007 financial results:

• Market Cap: Depending on the daily stock price the total market capitalization is around $9.5 billion over 170 million shares on issue
• Shareholders Equity: $2.8 billion making the stock’s book value approx. $16.2 per share (365% growth on FY2006, largely affected by an the Sydney Future Exchange merger)
• Earnings per share: $1.72 making the average EPS growth in last 3 years about 29%
• Return on Equity: 10.6%, averaging around 28.7%pa in last 3 years
• Balance Sheet: Working capital of $369.9 million (ie. $2.18 per share) and no debt

Sharemaket’s valuation:
Average ASX’s Price to Earnings ratio of 21.5 suggests the share price around $37 ($1.72 EPS x 21.5 P/E)

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 15%
• Share price in 10 years time: about $149 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)
• Total shareholders return in 10 years times: $183 (share price of $149 plus about $34 of the 10 years worth of dividends if the current payout ratio of 85% persists)
• Rate of Return in next 10 years based on the mid November 2007 price of $55 per share: 13%pa

Pros and cons:
+++ Established leader with effective monopoly on trading in Australia
+++ Strong ROE and EPS growth
+++ Strong balance sheet with no debt
— Popular issue constantly trading on higher P/Es => little margin of safety at prevailing stock price

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This entry was posted on Monday, November 12th, 2007 at 12:39 pm and is filed under Australian stock. You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.