Angel Broking - Multi Commodity Exchange (MCX) - IPO Note

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RAJESH DESAI

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Feb 22, 2012, 11:30:00 PM2/22/12

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Dear All,

Forwarding you the Multi Commodity Exchange (MCX) - IPO Note

Multi Commodity Exchange (MCX) – Subscribe

A Gold(en) Opportunity

Sustainable competitive position: Multi Commodity Exchange of India Ltd. (MCX) is a leading commodities exchange, which received permanent recognition from Government of India on September 26, 2003. The company reported a market share of 87.3% as of December 2011. MCX is also the fifth largest commodity futures exchange globally in terms of the number of contracts. As of June 2011, MCX was the largest silver exchange, the second largest gold, copper and natural gas exchange and the third largest crude oil exchange for this period globally.

Growth strategy in place: MCX has introduced a variety of new commodity futures contracts; and since inception, the number of products offered by the company has grown from 15 to 49 as of December 31, 2011. MCX has 2,153 members nationwide with over 296,000 terminals, including CTCL spread over 1,572 cities and towns in India. The company intends to continue to increase the number of participants by introducing new products on its exchange by expanding to more geographical areas, which is expected to drive growth going ahead. Regulatory changes can also lent a fillip to MCX as currently option contracts are not allowed to be traded in commodity. Any changes in favor of MCX can lead to a major increase in revenue and profitability going ahead.

Outlook and valuation: MCX currently has zero debt on its book, and major capex to fuel growth has already been incurred by the company. Secondly, the company reported investment and cash worth `1,324cr at the end of 9MFY2012, which works out to `260/share. On an annualized basis, the stock will be trading at 15.1x and 18.1x at the lower and upper band on FY2012E earnings, respectively, which we believe is fair compared to global peers, which trade at 18x-19x TTM earnings; further, the recent off-market deals value MCX’s Indian peers, NSE and BSE, at 22x-24x 9MFY2012 annualized earnings. We believe MCX being the only major commodity exchange in India and the world’s fifth largest exchange can witness strong growth in revenue and profitability going ahead, which makes its valuation much more attractive than global peers. Hence, we recommend Subscribe to the issue on account of its relatively fair valuations.

Kindly click on the following link to view the Report.

Multi Commodity Exchange (MCX) - IPO Note

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With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6^th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
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