The ASX Ltd (ASX: ASX) share price could rise after a robust half year profit report delivered to the market today.
Here are the key takeaways from the ASX Ltd half year report:
- Revenue rose 2.8% to $386.6 million
- Profit rose 3% to $219.4 million
- An interim fully franked dividend of $1.02 per share was announced, up 2.9%
ASX Ltd is Australia's premier stock exchange operator. It makes money by offering listing services to new companies and the more than 2,200 companies that call the ASX home. It also makes revenue on trades in shares and other assets, such as bonds and futures contracts, and through its clearing services.
Basically, the local share market wouldn't exist without the ASX's services, so its near-monopoly control (there is one smaller operator) affords it a defensive stream of revenue.
"The result was underpinned by healthy levels of cash market and derivatives trading activity, stimulated in part by market reaction to the US Presidential election," ASX CEO, Dominic Stevens, said. "The dip in revenue from our Listings business reflects the comparison with last year's strong level of secondary capital raisings."
The ASX added 86 more companies to the official list during the half year to 31 December 2016, up from 77 in the same period last year. However, the amounts raised were smaller.
Looking ahead, ASX Ltd will continue to benefit from new listings, and the increasing activity on debt, options and futures markets.
"We continue to be positive about ASX's business and prospects. While ASX benefits from macro tailwinds, our strategy is to capture and enlarge that natural growth by developing new products, opening new markets and upgrading our technology," Mr Stevens added. "We have much more to do and the opportunities ahead are exciting."
Should you buy ASX Ltd shares?
ASX Ltd shares offer defensive income and modest growth potential, in my opinion. However, its potential is no secret, so the market has priced its shares accordingly.
Personally, I think it is a good one for the watchlist but until the valuation becomes more compelling it's not a standout buy.
