DALLAS, TX -- February 24th, 2025 -- NZX Limited (NZSE: NZX): Stonegate Capital Partners updates their coverage on NZX Limited (NZSE: NZX). NZX reported revenue, adj EBITDA, and adj EPS of $62.9M, $24.7M, and $10.22, respectively. This compares to our estimates of $61.0M, $22.1M, and $7.94. Topline outperformance was due to strong results in all segments. This outperformance was exacerbated by higher GPM than expected in the Wealth Tech segment.
COMPANY UPDATES:
Markets: Capital raised and listed in FY24 totaled $15.8B. This represents a y/y increase of 11.6%. The total value traded saw a robust increase in 2H24, significantly boosted by major index rebalancing activities and the Auckland Council's divestment of its remaining shares in Auckland International Airport. By the end of the year, the value traded reached $41.5B, marking a 22.9% rise compared to FY23. This achievement represents NZX's third-highest annual result ever.
Smart: Previously “Smartshares”, Smart ended the half with FUM of $13.5B, which is up 22.6% from 2H23. FUM grew from positive net cashflows, and positive market returns of $0.8B and $1.7B, respectively. This quarter, the Company rebranded Smart ETFs as the first phase of a rebranding strategy extending into 2025. Additionally, NZX announced a strategic alliance with iShares by BlackRock, and QuayStreet’s integration with Smart’s model is progressing to unlock synergies. Smart’s operations continue to mature, with fund structure streamlining and system upgrades.
Wealth Technology: Wealth Technologies closed FY24 with $16.2B in FUA, a 40.4% increase from FY23. This growth was driven by $2.9B in new client migrations and $1.8B in market returns. The platform expanded significantly, onboarding 12 new clients, bringing the total active client count to 32. Notably, external client activities turned cash flow positive in December 2024. Annual Recurring Revenue (ARR) from external clients grew 50% y/y, reaching $10.8M, with a pipeline potential ARR of $14.2M.
Financial Position: NZX maintained a solid balance sheet in FY24, ending the year with $28.8M in cash and $127.0M in net assets. The Company declared a fully imputed final dividend of $.031, bringing the total FY24 dividend to $.061. Capital expenditures remain elevated due to continued investment in Smart and Wealth Technologies, particularly for client migration and system enhancements.
Updated Guidance: NZX has provided 2025 EBITDA guidance in the range of $49.0M to $54.0M, reflecting continued strong performance across core segments. Growth is underpinned by Smart’s 22.6% y/y increase in FUM to $13.5B and the recurring nature of Wealth Technologies’ revenue. We have made modest adjustments to our model.
Valuation: We use a Dividend Discount Model, DCF Model and EV/EBITDA comp analysis to guide our valuation. Our Dividend Discount uses the NZX stated range of payout ratios on 2026E Net Income to arrive at a valuation range of $1.52 to $1.88 with a mid-point of $1.70. Our DCF analysis produces a valuation range of $1.58 to $1.83 with a mid-point of $1.69. Our EV/EBITDA valuation results in a range of $1.55 to $1.89 with a mid-point of $1.72. Lastly, we note that NZX is the only company in the comp set with a BV/Share value below $1.0.
