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The theory that the global economic slowdown would lay waste to the carbon abatement industry doesn't seem to be playing out. Climate Exchange, which operates the European Climate Exchange and the Chicago Climate Exchange, has turned profitable and is seeing record monthly demand for its futures and options products as industrial emitters and investment houses look to hedge themselves against volatility in the carbon price.
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With carbon trading well established in Europe, and the EU having recently announced that its trading scheme will continue to at least 2020, the next big boost for Climate Exchange is likely to be the introduction of a mandatory cap and trade system in the US. President Obama has indicated that he wants a system in place by 2012 and Climate Exchange has already built itself a strong early mover position through the establishment of the Chicago Climate Exchange. As chief executive Neil Eckert puts it: "Politically, it looks about as good as we hoped for."
Climate Exchange is also positioning itself in other potentially huge markets. It has signed a joint venture to establish an exchange in China, there's an Indian venture in the pipeline, and it is involved in exchanges in Canada and Australia. Products are also evolving, with a hurricane catastrophe product aimed at the insurance industry selling well, and future products planned involving water.
Morgan Stanley expects EPS of 6.8p for 2009.
Guide to the terms used in IC results tables.
More analysis of company results.
CLIMATE EXCHANGE (CLE) |
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|---|---|---|---|---|
| ORD PRICE: | 824p | MARKET VALUE: | £388.2m | |
| TOUCH: | 822-830p | 12-MONTH HIGH: | 2,045p | LOW: 430p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 177p* | NET CASH: | £12.4m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2004 | na | -1.03 | -5.63 | nil |
| 2005 | na | 1.50 | 4.85 | nil |
| 2006 | 1.09 | -10.5 | -31.7 | nil |
| 2007 | 13.8 | -8.33 | -9.53 | nil |
| 2008 | 22.8 | -2.54 | -4.26 | nil |
| % change | +65 | - | -55 | - |
*Includes intangible assets of £64.5m or 137p a share |
||||
Climate Exchange is well positioned for what could become a huge global market. But, after soaring from just 430p a few weeks ago, the shares are now looking up with events. Fairly priced.
Last IC View: High enough, 1,114p, 18 September 2008.
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