Daily ShareChat: NZX

By Jenny Ruth

Wednesday 14th April 2010

NZX's core operation continues to trade well but its shares are likely to trade sideways until greater clarity is gained regarding its cost base, the success of recent acquisitions, the new clearing house launch, including how much capital NZX will need to tie up, and how it is executing on its growth initiatives, says First NZ Capital analyst Greg Main.

"The market is looking for a better understanding and to see some evidence how NZX's cost base will track as it consolidates recent acquisitions and as it absorbs and manages upfront costs related to its growth ambitions," Main says.

NZX is primarily focused on developing derivatives and commodity trading. "On the latter, this is really a two-to-three-year story but we expect an update on NZX's potential involvement in energy futures/hedge trading mid-year when we expect a decision on whether it will be ASX or NZX which is the preferred supplier to this market."

After a confusing December quarter result, the March quarter result should provide some clarity around costs but it will take either a strong result, which is unlikely, or at least one or more quarters for investors to gain greater comfort around cost pressures and drivers, Main says.

He has lowered his forecasts for calendar 2010 and 2011 by 7% and cut his target price from $2.10 to $1.90.

BROKER CALL: underperform.

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