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NZX upgraded to 'hold' from 'sell' by brokerage Craigs after share price underperforms

Wednesday 30th October 2013

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NZX, the stock exchange operator whose shares have lagged behind its own benchmark index in the past year, was upgraded to 'hold' from 'sell' by brokerage Craigs Investment Partners.

Shares in NZX recently slipped 0.8 percent to $1.26 and have gained just 1.6 percent in the past year compared to the NZX 50 benchmark's 23 percent gain.

"Following recent underperformance NZX's share price is now trading on a reasonable forward price-to-earnings ratio of 23 times and in line with our discounted cash flow-derived price target of $1.24," Craigs analysts Stephen Ridgewell and Bryant Cheong said in a note. "We continue to view NZX as a high quality, well managed business. Accordingly, we upgrade to hold (from sell)."

Craigs increased its price target to $1.24 from $1.20 and raised its 2013 net profit forecast by 4.7 percent to $14 million, reflecting higher revenue and lower tax. The Australian stock exchange operator trades on a lower price-to-earnings ratio of 18x, the analysts said.

The stock exchange operator is likely to update the market on its dividend and capital management policies within the next three to six months, and a 100 percent payout ratio is sustainable given its low debt and minimal capital needs, the analysts said.

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