Dear Readers, BHAVIKK SHAH's BLOG is totally free website. Contents here should be viewed for Knowledge purpose only. Author does not charge for any kinds of the services. Kindly don't entertain to any of the paid services in a name of BHAVIKK SHAH's BLOG !!

Monday, October 29, 2012

MCX : MULTI COMMODITY EXCHANGE - India's New Stock Exchange !!!


Q 2 RESULTS ON 2nd November 2012 !!!


Scrip Code: 534091 MCX
CMP:  Rs. 1384.20; Buy at Rs. 1375 - 1385 levels.
Medium to Long term Target – Rs. 1440; 
STOP LOSS – Rs. 1274.00; Market Cap: Rs. 7,059.19 Cr; 52 Week High/Low: Rs. 1446.95 / Rs. 838.00
Total Shares: 5,09,98,369 shares; Promoters : 1,32,59,575 shares –26.00 %; Total Public holding : 3,77,38,794 shares – 74.00 %; Book Value: Rs. 195.52; Face Value: Rs. 10.00; EPS: Rs. 56.12; Div: 240 % ; P/E: 28.02 times; Ind P/E: 26.67; EV/EBITDA: 14.02.
Total Debt: Rs. ZERO Cr; Enterprise Value: Rs. 7,059.19 Cr.

Multi Commodity Exchange Of India Ltd: MCX was incorporated as a private limited company on April 19, 2002 in Mumbai, India. Multi Commodity Exchange of India Ltd (MCX) is a state-of-the-art electronic commodity futures exchange. The demutualised Exchange has permanent recognition from the Government of India to facilitate online trading, and clearing and settlement operation for commodity futures across the country.  MCX holds a market share of over 85 % as on March 31, 2012 of the Indian commodity futures market. The Exchange has more than 2,710 registered members operating through over 3,46,000 including CTCL trading terminals spread over 1,577 cities and towns across India. MCX was the third largest commodity futures exchange in the world, in terms of the number of contracts traded in CY2011. The Exchange is the world's largest exchange in Silver and Gold, second largest in Natural Gas and the third largest in Crude Oil with respect to the number of futures contract traded. MCX was the first exchange in India to initiate evening sessions to synchronise with the trading hours of global exchanges in London, New York and other major international markets. It was the first exchange in India to offer futures trading in steel, crude oil, and almond. Among international alliances, MCX have formed strategic alliances with a number of exchanges such as the London Metal Exchange, the New York Mercantile Exchange, the LIFFE Administration and Management (under renewal), the Baltic Exchange Limited, Shanghai Futures Exchange and Taiwan Futures Exchange. MCX holds 5 % in Dubai Gold and Commodity Exchange and the book value of this investment was Rs. 2.185 Cr as of December 31, 2011; 100 % in MCX Clearing Corporation Ltd; 5 % in MCX SX; 26 % in MCX-SX Clearing Corporation Ltd; 51 % in SME Exchange of India Ltd with initial investment of Rs. 5,10,000. MCXIL is compared with Financial Technologies (India) Ltd in India, Ichiyoshi Securities Co Ltd of Japan, Osaka Securities Exchange also from Japan, CME group, Intercontinental Exchange Inc, Nasdaq OMX Group/THE, CBOE Holdings Inc, London Stock Exchange Group, TMX Group Inc, Deutsche Boerse AG, Bolsas Y Mercados Espanoles, ASX Ltd, Singapore Exchange Ltd, Hong Kong Exchange & Clearing House Ltd, Bursa Malaysia BHD

Investment Rationale:
Multi Commodity Exchange of India (MCX) is a state-of-the-art electronic commodity futures exchange, with near monopolistic market share of 86 % in FY12. MCX enjoys a competitive edge, given that its trading platform is supplied by its promoter, Financial Technologies India (FTECH), which is a leading developer of exchange related software and technology. Technology for the exchange industry is difficult to replicate, and this provides the company with a competitive advantage. Exchanges require constant technology upgrades and support, necessitated by regulatory regime and market forces. MCX is able to obtain speedy and efficient technology solutions from FTECH. MCX’s current technology infrastructure is sufficient to handle daily trading volumes of up to 10,000,000 in a day. So far, it has handled a high of 1,867,612 trades in a day. MCX has 2,170 members and 346,000+ terminals including computer-to computer links (CTCLs) spread over 1,577 cities and towns across India as at the end of FY12. The number of terminals has increased from 117,000 in FY10. Healthy terminal additions partially offsets the risk of lower volumes traded per member, with gradual ramp-up in volumes expected from new additions. Being the largest commodity exchange in India, with near-monopolistic market share, MCX is the key source of data on commodity trends. This gives MCX the opportunity to benefit from new non transaction revenue sources like market data product and information offerings.  This not only provides scalability to the business model, but also offers potential for growth with limited incremental costs. Growth in commodity markets facilitate demand for better trading and analytical tools, risk management tool, market data products and price information offerings which could be new revenue streams. Globally, exchanges derive 10% - 15 % of their revenues from such services. Indian exchanges do not match that number, especially in equities, given weak acceptance of algorithmic trades. MCX is better placed to garner revenues from such sources, given its speedier execution in such trades, which already constitute significant proportion of the company’s volumes. To facilitate the same, MCX has entered into agreements with financial information service agencies to provide real time data-feed on trading prices, trading volume and other information on the Exchange and on the spot market. The company currently has such arrangements with the following entities: Bloomberg Finance L.P.; NewsWire 18 Private Limited; IQN Data Solutions Private Limited; Reuters India Private Limited; Interactive Data (Europe) Limited and TickerPlant Limited. It is expected that it will sustain its market leadership which is steamed up from its technological edge and future readiness. MCX's volumes have grown at a CAGR of 47 % over FY07-FY12. Future potential remains exciting given that government on 4th October cleared the new FCRA Bill which seeks to provide complete autonomy to the commodities FMC and introduce new categories of products, with MCX having 20 lakhs client accounts as compared with 1.9 Cr – 2 CR Demat accounts, the industry has only scratched the surface with respect to potential volumes.

Outlook and Valuation:
MCX-SX, promoted by MCX and FTECH, was recently cleared to become a full-fledged stock exchange. Like BSE and NSE, it can now start trading in equities, equity derivatives and other asset classes. Currently, MCX-SX only offers trading in currency futures contracts, but soon MCX-SX intends to have a dedicated platform for small business, and hopes SME's should aspire to raise upto US$ 20 million annually through such platforms. There are at least 1% of the 30 million SME's which have strong balance sheets to get AAA rating and can look at raising money from the primary market, many SME's depend on informal system for their financing needs, paying upto 2% per month for debt & in spite of a such a high cost of servicing debt, the business continues to remain competitive & wonder quantum of benefits which will accrue if they shift to formal way of finance and access the Equity Markets. Private equity, Venture Capital and Angel Funds will invest in such companies only if they are confident of an exit route which can be made easy by the formally platforms like exchanges..

MCX-SX announced its flagship index of MCX Stock Exchange (MCX-SX) known as ‘SX-40’ which will be a free float based index of large market cap and liquid stocks representing most important sectors. MCX-SX will collaborate its indices with the initiatives support from the sources like Indian Statistical Institute – India’s premier research institute, FTSE, London and FTKMC in creating various domestic and global indices. This partnership will help MCX-SX to create new indices that will enable domestic and global investor to track, analyse and invest in India’s dynamic financial markets. The value from MCX-SX is more definite than merely option value, considering this FY14 is expected to be first full year with operations in currency and equities. MCX-SX Equity Stock Exchange is in competition with BSE & NSE. The Bombay stock exchange had a legacy of 132 years in India, a reliable brand, with the letters almost becoming synonymous with investing in India. However, all this was till NSE came onto the scene in 1992. Being a relatively new entity, NSE was nimbler and more receptive to innovation. While it was difficult for NSE to carve a niche initially, but quickly realizing the importance of IT and innovative products to meet the growing sophistication of the financial markets, NSE raced ahead to rule market share charts. However the share of it has continued to improve even after the shift of balance in power is reflected in the turnover metrics on the two exchanges since FY01. MCX-SX, with its parentage of Financial Technologies, has access to technology and management having experience of operating exchanges successfully across the globe will successfully be able achieve its share of market pie. On valuation side - NSE received a valuation of Rs. 17,100 Cr in the last known stake sale which happened in December 2011, which discounted its FY12 revenues by 11x . This is at par with the Price/Sales ratio that Singapore enjoys. MCX-SX had revenues of Rs. 39.1 Cr in FY11. However, the levying of transaction charges in currency futures had commenced only from August 2011, implying that in FY12, the company had 7 months of additional income in the form of transactional charges in FY12. Going by the volumes and rate card, this translates into Rs. 41.5 Cr of revenues from transaction charges, and even if we assume that other sources of income reduced as member additions may have fallen, FY12 revenue would still be higher than Rs. 60 Cr. Given the low base and high growth, the valuation multiple could be higher, so discounting FY14E the revenue is estimated at Rs. 130 Cr by 11x, to arrive at a valuation at Rs. 1400 Cr. MCX's stake in MCX-SX (including warrants) amounts to Rs. 540 Cr. Within the next 18 months, the shareholding of MCX and FTECH in MCX-SX will have to be reduced to 2.5 % each, as the approval is subject to the condition that the combined voting rights of FTECH and MCX in MCX-SX will not exceed 5 %. Earlier, FTECH held 31 % and MCX held 38 % in MCX-SX. Then, to comply with SEBI guidelines for starting equity trading, they reduced their stake in MCX-SX to 5 % each. This was done through conversion of excess equity stake (beyond 10 %) to warrants. This led to 68.2 % reduction in capital from Rs. 170 Cr to Rs. 54 Cr. The warrants will be sold to banks and financial institutions. The value of MCX's standalone business comes at 20x FY14E, in-line with the average multiple to commodity exchanges in the emerging markets. There are enough reason for MCX to even trade at a premium given the scope to outgrow peer exchanges globally, given that the potential is still untapped in India, its higher growth will be augmented by even better earnings and improvement in return ratios (variable costs largely only in the form of transaction fees paid to parent), and its near-monopolistic market share, to which there is little threat, given MCX’s technology backbone and readiness to latch on to new opportunities and also the policy to maintain 50 % payout ratio is a key valuation positive. The valuation of MCX’s standalone business at 20x FY14E EPS of Rs. 66.5 – Rs. 1,330/sh; the valuation of the stake in MCX-SX (incl. warrants) comes at Rs. 4,500 Cr. Assuming a revenue base of Rs. 130 Cr in FY14, at 11x FY14 Sales, MCX-SX's valuation is Rs. 1400 Cr (much lesser than that implied in the last stake sale). Stake in MCX-SX (including warrants) contributes additional Rs. 110 per share to MCX. It is expected that MCX to have volumes growth of 15 % CAGR over FY12-15 and a PAT CAGR of 13% over this period. Also, the ROE should sustain its level in the high 20's.  In my view MCX could report FY14E EPS of Rs. 66.50/sh and for FY 15E of Rs. 76.50/sh. The stock could be bought for the target price of Rs. 1440 implies 23 % upside in earnings and recommend Accumulate on the stock.

KEY FINANCIALSFY12FY13EFY14EFY15E
SALES (Rs. Crs)526.20517.20615.20720.00
NET PROFIT (Rs. Crs) 286.20282.40339.40407.10
EPS (Rs.)56.1055.4066.5079.80
PE (x)20.9021.2017.6014.70
P/BV (x)6.005.304.604.00
EV/EBITDA (x)14.3014.7011.509.00
ROE (%)31.0026.5027.8029.00
ROCE (%)24.8025.5026.9028.20

I would buy MCX INDIA LTD with a price target of Rs. 1440 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 1274.00 on your every purchase.

READ HERE TO KNOW MORE ON LONG TERM INVESTING -
 CLICK HERE

VIEW THE PPT PRESENTATION ON

51 comments :

  1. It is extremely interesting for me to read this blog. Thanks for it. I like such themes and everything that is connected commodity & stock market. Thanks with Regards
    Stock Tips, NIFTY Tips, Commodity Tips

    ReplyDelete

  2. Useful information shared. I am very happy to read this article. Thanks for giving us nice info. Fantastic walk-through. I appreciate this post.




    Bullion Tips | Mcx Trading Tips

    ReplyDelete
  3. Nowadays, Some of the stock marketinvestors are getting huge returns but some are not because of lack of trading knowledge. So come and let’s start discussion in this cool blog and see what everyone say about it, this will be very beneficial for stock market traders.

    ReplyDelete
  4. Good blog, very useful content and information shared .you can also Check nifty

    ReplyDelete
  5. This is so cool. I am such a huge fan of their work. I really am impressed with how much you have worked to make this website so enjoyable.

    ReplyDelete
  6. My cousin recommended this blog and she was totally right keep up the fantastic work!



    SEO Services Singapore

    ReplyDelete
  7. After long time i have seen very interesting and useful blog. I really appreciate to the blog owner for a very great job done.

    ReplyDelete
  8. After long time i have seen very different and knowledgeable blog about stock marketing and trading business. These is very beneficial for trading. Great job done by blog owner here.

    ReplyDelete
  9. This is one of the good articles you can find in the net explaining everything in detail regarding the topic. I thank you for taking your time sharing your thoughts and ideas to a lot of readers out there.

    ReplyDelete
  10. After long time i have seen very knowledgeable post. I really appreciate to the blog owner work. Interesting post.

    ReplyDelete
  11. I really enjoyed during reading this blog. I need really stock news because i want to know more about stock tips and commodity tips. Thanks for a very interesting and knowledgeable blog.

    ReplyDelete
  12. Really good and informative post on commodities, the coming years will see a lot of investor interest in especially gold and silver commodities.

    ReplyDelete
  13. Hi,
    This one is great and is really a good post. I think it will help me a lot in the related stuff and is very much useful for me. Very well written I appreciate & must say good job.
    flex developer London

    ReplyDelete
  14. One of the best MCX exchange article, it means the investment in MCX is increasing day by day & peoples are getting crazy to invest more in this market.

    Free Commodity Tips for Beginners

    ReplyDelete
  15. This is one of the good articles you can find in the net explaining everything in detail regarding the topic. I thank you for taking your time sharing your thoughts and ideas to a lot of readers out there.

    ReplyDelete
  16. I want to thanks for the efforts you have put in composing this blog post. I am hoping the same top-quality blog post from you in the upcoming as well. In fact your creative writing abilities has inspired me to get my own blog now. Truly the blogging is spreading its wings rapidly. Your write up is a good example of it.
    stock tips

    ReplyDelete
  17. Your blog is very useful to all the people especially for commodity trader. So much important information is there in your site and my site is also having valuable information.
    Commodity Charts, Gold Prices India, Silver Prices Charts, Copper live Charts

    ReplyDelete
  18. Thanks for the FANTASTIC post! This information is really good and thanks a ton for sharing it :-) I m looking forward desperately for the next post of yours..Commodity tips

    ReplyDelete
  19. This is so cool. I am such a huge fan of their work. I really am impressed with how much you have worked to make this website so enjoyable. commodity trail

    ReplyDelete
  20. I always like your blog post because you always comes with different ideas and information. I always shared your site post with my friends. Keep posting and i will follow you. share market tips

    ReplyDelete
  21. Mostly i like to trade in Bullion market, because from the last some years gold & silver both prices becomes double, so profit also increased. Now, peoples becomes excited to earn more money from commodity market. Precious metal is one of the best investment in commodity market. So if you are thinking to invest money in trading then consult with the Best Commodity Advice experts so that you can minimize the risk in trading.

    ReplyDelete
  22. Thanks so much for this. This is awesome post I ever seen on internet. This is rare to find that’s why difficult to understand. Anyway,
    you are definitely someone that has something to say that people need to hear. Keep up the good work. Keep on inspiring the people.
    Commodity Tips

    ReplyDelete
  23. Dear Visitor,
    Would like to appreciate the effort of the webmaster for creating such a wonderful blog which is very helpful for the visitors.
    Would like to add few notes here like if we are trading in SHARE MARKET NSE BSE FREE TIPS INTRADAY TIPS say specially in NSE and BSE which are one of the most popular stock exchanges of the world then we need to take care of the few things like

    1. Always trade in limit
    2. Do not make tade on emotional basis
    3. Always try to get professional support before taking risk in stock market
    4. Rely on professional research rather than speculation.

    This is for sure if we follow above 4 points then we can always stay in good profit.

    Regards
    BIGPROFITBUZZ TEAM

    ReplyDelete
  24. Thanks so much for this. This is awesome post I ever seen on internet. This is rare to find that’s why difficult to understand. Anyway,
    you are definitely someone that has something to say that people need to hear. Keep up the good work. Keep on inspiring the people.
    Equity Tips

    ReplyDelete
  25. This is nice post which I was awaiting for such an article and I have gained some useful information from this site. Thanks for sharing this information.

    ReplyDelete
  26. Thanks a lot for sharing this amazing knowledge with us. Really your blog is very interesting....it contains unique information.

    ReplyDelete
  27. The blog was absolutely fantastic! Lot of great information which can be helpful in some or the other way. Keep updating the blog, looking forward for more contents...Great job, keep it up..
    Thanks From Intraday Tips.

    ReplyDelete
  28. I would want to thnkx for that efforts you've invest script this web page. I touch hopeful the similar high-grade web position placement stopping at you inside the forthcoming as anyway. Clothed in genuineness your imaginative writing skills has motivated me to achieve my own blog today. In fact your blogging is actually spreading its wings fast. Your invent is a sunny paradigm of it.

    ReplyDelete
  29. Thanks for sharing the information. That’s a awesome article you posted. I found the post very useful as well as interesting. I will come back to read some more. Stock tips

    ReplyDelete
  30. Great tips from blog experts that really add value to their community, thanks so much


    stock tips
    equity tips


    ReplyDelete
  31. Good work…unique site and interesting too… keep it up…looking forward for more updates.

    ReplyDelete
  32. Hey there! I've been following your website for some time now and finally
    got the courage to go ahead and give you a shout out from Dallas
    Texas! Just wanted to mention keep up the excellent
    job!

    Feel free to surf to my website :: cesar milan suicide

    ReplyDelete
  33. Very interesting post about market. i learn many kinds of market updates and calls. this all is very accurate and beneficial calls. i want more latest update please share more news like this.....

    ReplyDelete
  34. great post about commodities trading in India, i would like to know about trading, can you please update here regularly!!

    ReplyDelete
  35. Nice to be visiting your blog again, it has been months for me. Well this article that i've been waited for so long. I need this article to complete my assignment in the college, and it has same topic with your article.
    Thanks, great share.
    stock Market tips
    Commodity tips
    Equity tips

    ReplyDelete
  36. nice blog,very useful contact and information share.Epic Research

    ReplyDelete
  37. So informative things are provided here, I really happy to read this post, I was just imagine about it and you provided me the correct information I really bookmark it, for further reading, So thanks for sharing the information.
    stock Tips
    commodity tips
    nifty tips

    ReplyDelete
  38. Multi Commodity Exchange (MCX) is India's best commodity exchange and there are several MCX market advisory firms, listed and traded under it.

    ReplyDelete
  39. First of all i would like to thank you for the great and informative entry. I have to admit that I have never heard about this information I have noticed many new facts for me. I want to thank you for this informative read; I really appreciate sharing this great.
    Stock Trading Tips

    ReplyDelete
  40. Wow, wonderful blog layout! How long have you been blogging for? you made blogging look easy. The overall look of your site is excellent, as well as the content!-

    Cash Tips

    ReplyDelete
  41. Your blog is really a useful having informational content. Thanks for posting & Keep blogging.

    ReplyDelete
  42. With this blog I come to know about different aspects of the commodity market.I really enjoyed reading your blog posts, the variety of writing is smashing. This blog as usual was educational, I have had to bookmark your site and subscribe to your feed in i feed. Your theme looks lovely.Thanks for sharing.
    silver tips advisor

    ReplyDelete
  43. Your blog is so awesome and also the useful to the trader.....................
    Stock Tips

    ReplyDelete
  44. I've always enjoyed reading your blog and this particular post was especially good. Thanks for sharing it!!!!!

    Equity Tips

    ReplyDelete
  45. I really enjoyed reading you blog posts, the variety of writing is smashing.

    thanks,
    Mcx Free Trial | Mcx Gold Tips Provider

    ReplyDelete

Related Posts Plugin for WordPress, Blogger...

Share

Why you should have a Stop Loss of 8 % ? Click to know more. Author is also on Facebook and Click here for SHORT STORIES

X