Stonegate Capital Partners Updates Coverage on NZX Limited Following 1H25 Results

Stonegate Capital Partners has updated its coverage on NZX Limited (NZSE: NZX) following the company's first half 2025 financial results. NZX reported revenue of $61.7 million, operating profit of $11.6 million, and EBITDA of $24.1 million for the period. These figures came in slightly below Stonegate's estimates of $64.1 million, $13.6 million, and $25.0 million respectively, with the differences primarily attributed to macroeconomic uncertainty. The firm expects that a portion of this variance will be compensated in the second half of 2025 as macroeconomic conditions stabilize.

The markets segment demonstrated exceptional performance with capital raised and listed totaling $11.9 billion in 1H25, representing an 87.8% year-over-year increase. A significant portion of this growth came from the Fonterra Co-Op Group transfer, which accounted for $4.8 billion. Total value traded saw a robust 31.4% year-over-year increase to $21.8 billion. The company is expected to continue focusing on building liquidity as it introduces index futures, following self-match preventions and NZX Dark initiatives. Information services revenue reached $10.0 million for the half, up from $9.3 million in 1H24.

The Smart segment, previously known as Smartshares, ended the half with funds under management (FUM) of $14.0 billion, representing a 3.8% increase from 2H24. This growth was driven by positive net cash flows and market returns despite macroeconomic uncertainty that caused a temporary blip in FUM growth. The company continued its rebranding efforts during the quarter, with the new brand rolling out to remaining products over the coming year. Smart's operations continue to mature with fund structure streamlining and system upgrades enhancing operational efficiency.

Wealth Technology closed 1H25 with $17.6 billion in funds under administration (FUA), an 8.6% increase from FY24 end. This growth was driven by $1.3 billion in new client migrations and $0.1 billion in market returns. The platform expanded significantly, onboarding three new clients and bringing the total active client count to 35. Additionally, NZX won four new clients during the period. Annual Recurring Revenue (ARR) from external clients grew 32.9% year-over-year, reaching $11.9 million, with a pipeline potential ARR of $13.9 million.

NZX maintained a solid balance sheet in 1H25, ending the half with $14.2 million in cash. The company declared a fully imputed interim dividend of $0.03, unchanged from the previous year. Capital expenditures remain elevated due to continued investment in Smart and Wealth Technologies, particularly for client migration and system enhancements. NZX has reiterated its 2025 EBITDA guidance in the range of $49.0 million to $54.0 million, reflecting continued strong performance across core segments. Growth is underpinned by sound fundamentals and a stabilizing macro environment.

Stonegate's valuation analysis utilizes multiple methodologies including a Dividend Discount Model, DCF Model, and EV/EBITDA comparable analysis. The Dividend Discount Model, using NZX's stated range of payout ratios on 2026 estimated net income, produces a valuation range of $1.78 to $2.20 with a midpoint of $1.99. The DCF analysis yields a valuation range of $1.70 to $1.96 with a midpoint of $1.82, while the EV/EBITDA valuation results in a range of $1.54 to $1.89 with a midpoint of $1.72. These valuation ranges reflect the company's strong fundamentals and growth trajectory across its diversified business segments.