New Zealand's stock exchange operator, NZX [NZX: NZX], is expecting to reap moderate growth from recent investments over the next two to three years, and to seek greater involvement in passive managed funds, where the local market has lagged Australia and the US.
Slides prepared for an NZX investor day presentation give no guidance on future earnings, but say "the focus remains on organic growth" and small acquisitions, particularly for new streams of saleable agricultural data.
NZX has "two to three years to realise the upside" of recent investments, says slides prepared for chief executive Tim Bennett, after a period of investment in new business lines that have delivered 7 percent compound annual growth in revenues since 2009. CAGR of 14 percent was achieved between 2003 and 2008, during the early years of previous chief executive Mark Weldon's tenure.
The presentation shows the largest single source of activity in 2013 was listing fees and securities data, bringing in $20.2 million to provide 32.3 percent of total revenue, while capital-raising, trading and clearing was worth $14.7 million and represented 23.4 percent of activity.
The last year was characterised by two partial privatisations of state-owned electricity companies, MightyRiverPower and Meridian Energy, and a selldown to 51 percent government ownership of already listed Air New Zealand.
Over the next two to three years, trading, clearing and data revenues are expected to grow between 5 and 10 percent annually with no new investment required, while funds under management are projected to grow by between 10 and 15 percent annually and may attract "limited acquisition" spend.
"IPO activity is expected to be focused on smaller to medium size listings compared to 2013," the presentation says, with a relaunched small cap board "not having an immediate impact on revenues" but creating a pipeline for future main board listings.
NZX expects trading and clearing volumes to remain "robust" and the exchange will launch two new funds management products in 2014 "to drive growth in funds management beyond 2013 levels."
NZX equity derivative values were anticipated to grow from 2.5% to 20% of the cash market over five years, which was still "well below comparable markets."
On the capital expenditure front, NZX says it is budgeting $2 million to $3 million to maintain business as usual, with potential for a clearing system upgrade in 2015/16 and a trading system upgrade in 2019, but that "no other multi-million dollar projects are currently contemplated."
Growth in expenses, which topped $37.9 million in 2013, compared with $29.2 million in 2010, would slow as the current investment cycle ended.
NZX shares were up 0.8 percent in trading today, at $1.24.