Mark Barnett, UK equities manager at Invesco Perpetual, who we interviewed this week really likes London Stock Exchange (LSE), a recent addition to his portfolios. This share is listed on the FTSE 250 index and currently trades at around 1,330p a share. It has a market cap of £3.56bn and trades on a price-earnings ratio of 16.45.
"Last year we bought LSE, which we like for a number of reasons," says Mr Barnett. "This company has diversified its historic revenue and is making a good acquisition via the purchase of LCH.Clearnet. Buying this company is a very good play on increasing regulation of financial markets, especially derivatives.
LSE is also a beneficiary of more equity trading activity both here and in Italy, and if we have more initial public offerings (IPOs) and mergers and acquisitions, it will benefit."
LSE reported in its most recent interim management statement that in the last three months of 2012, total income of £208.9m was up 6 per cent on the same period last year, while over nine months year to date it was up 9 per cent at £632.5m. LSE says that going ahead it is well placed to continue developing and capitalising on its more diversified asset base, while its immediate focus remains on progressing the transaction with LCH.Clearnet.
Investors Chronicle rates LSE a 'hold'. This is because although LSE's operating profit rose 1 per cent at the half-year stage to £217.2m, without a £64.8m revenue contribution from the FTSE franchise acquired from Pearson (PSON), the picture would have been worse, with ongoing financial uncertainty having hit principal trading hard. That leaves few near-term catalysts ahead to drive a share price re-rating (read the tip update).
