Leading International Investment Research, Edison Investment Research

Edison Investment Research

Leading International Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.

Equity Bottom-Up

London Stock Exchange Group / Equity Bottom-Up

The variety of sources and volume of capital available to life science companies has never been more abundant.

A panel of industry experts from Silicon Valley Bank, LifeArc Ventures, Primary Bid and London Stock Exchange will discuss latest trends in sector capital raising, how companies can construct a supportive investor base and which strategies investors are using to differentiate themselves from the pack.

Moderator: Chris Mayo – CFA. Head of Primary Markets, Americas at London Stock Exchange Group

Panelists:
● Nooman Haque – Head of EMEA Healthcare, Silicon Valley Bank
● Clare Terlouw – Head of LifeArc Ventures
● James Deal – Co-Founder & COO, Primary Bid

Video: Alternate sources of capital for life sciences companies - Edison Open House: Global Healthcare 2021

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*November Market Stats Generally Positive: The Singapore Exchange (SGX.SP) [SGX] released its market statistics for November 2020. Unsurprisingly, the progress of the COVID-19 vaccine fuelled volume gains across the entire spectrum of SGX products; and*Taiwan Pressures: SGX ceased trading of MSCI Taiwan futures contracts on October 30, 2020 as these contracts moved to Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx]. Notional value traded market share of SGX - while usually volatile - has begun gradually declining to 90.4% in November from 92.4% in October. This will have significant implications over how much market share and fee pressure will be placed on SGX's lucrative A50 contract.

*November Market Stats Generally Positive: The Singapore Exchange (SGX.SP) [SGX] released its market statistics for November 2020. Unsurprisingly, the progress of the COVID-19 vaccine fuelled volume gains across the entire spectrum of SGX products; and*Taiwan Pressures: SGX ceased trading of MSCI Taiwan futures contracts on October 30, 2020 as these contracts moved to Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx]. Notional value traded market share of SGX - while usually volatile - has begun gradually declining to 90.4% in November from 92.4% in October. This will have significant implications over how much market share and fee pressure will be placed on SGX's lucrative A50 contract.  

Singapore Exchange – Strains Seen For TW Futures

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

New York-based <a href="https://www.smartkarma.com/entities/s-p-global-inc" target="_blank" data-smartkarma-citation="entities:9735:1" rel="noopener">S&amp;P Global Inc. (SPGI US)</a> has agreed to acquire London-based <a href="https://www.smartkarma.com/entities/ihs-markit-ltd" target="_blank" data-smartkarma-citation="entities:26496:1" rel="noopener">IHS Markit Ltd (INFO US)</a>, at an EV of $44.5 bn, including $4.8 bn of net debt.
<ul>
<li>The operation, advanced on 30 November by The Wall Street Journal, was later confirmed by the parties involved.</li>
<li>
All-stock deal: 0.2838 SPGI x 1 INFO.
<ul>
<li>equivalent to $96.94 per share of INFO upon announcement; this values the equity of INFO at $39.3 bn.</li>
<li>This represents 9.9x EV/ Forward Revenue, 22.8x EV/ Forward EBITDA and 32.8x P/Forward E.</li>
</ul>
</li>
<li>This deal is one of the biggest deals of the year in M&amp;A. It will have a huge impact in the financial sector: it will create a financial information giant capable of competing with Bloomberg and Refinitiv. Wall Street does not believe that the end of the coronavirus pandemic will cause subscriptions to data providers to plummet. Shares of S&amp;P Global and IHS Markit have risen between 78% and 100% from their respective lows in March.</li>
<li>The decline in the number of companies in the data market should be of concern to both customers and regulators. That said, management did not contemplate significant regulatory hurdles to the deal.</li>
</ul>
S&amp;P, whose businesses include credit rating, financial markets data, Platts energy data and its famous indices, has an operating margin of 56%. IHS Markit is less profitable, but its EBITDA margin is quite good, 40%.
Pro-forma M&amp;A model suggests acquisition may be accretive to EPS since as early as 2021.
I believe the deal should enhance SPGI's position as a proprietary data and solutions provider, while also reducing the company's sensitivity to Ratings.
<ul>
<li>The timing seems positive as Capital IQ consensus forecasts organic growth at IHS Market to accelerate in 2021 (6.8% revenue growth in 2121 and 6.3% in 2022), while SPGI faces a softer issuance outlook (3% revenue growth in 2021 and 5.8% in 2022, according to Capital IQ consensus).</li>
<li>Overall, while there is a strong strategic rationale behind the deal, there is also increased complexity which may weigh on SPGI.</li>
</ul>
The gross spread is currently 2.7% for a deal that it is highly likely to close. I recommend setting up the spread in the usual way.

New York-based S&amp;P Global Inc. (SPGI US) has agreed to acquire London-based IHS Markit Ltd (INFO US), at an EV of $44.5 bn, including $4.8 bn of net debt.

The operation, advanced on 30 November by The Wall Street Journal, was later confirmed by the parties involved.

All-stock deal: 0.2838 SPGI x 1 INFO.

equivalent to $96.94 per share of INFO upon announcement; this values the equity of INFO at $39.3 bn.
This represents 9.9x EV/ Forward Revenue, 22.8x EV/ Forward EBITDA and 32.8x P/Forward E.


This deal is one of the biggest deals of the year in M&amp;A. It will have a huge impact in the financial sector: it will create a financial information giant capable of competing with Bloomberg and Refinitiv. Wall Street does not believe that the end of the coronavirus pandemic will cause subscriptions to data providers to plummet. Shares of S&amp;P Global and IHS Markit have risen between 78% and 100% from their respective lows in March.
The decline in the number of companies in the data market should be of concern to both customers and regulators. That said, management did not contemplate significant regulatory hurdles to the deal.

S&amp;P, whose businesses include credit rating, financial markets data, Platts energy data and its famous indices, has an operating margin of 56%. IHS Markit is less profitable, but its EBITDA margin is quite good, 40%.
Pro-forma M&amp;A model suggests acquisition may be accretive to EPS since as early as 2021.
I believe the deal should enhance SPGI's position as a proprietary data and solutions provider, while also reducing the company's sensitivity to Ratings.

The timing seems positive as Capital IQ consensus forecasts organic growth at IHS Market to accelerate in 2021 (6.8% revenue growth in 2121 and 6.3% in 2022), while SPGI faces a softer issuance outlook (3% revenue growth in 2021 and 5.8% in 2022, according to Capital IQ consensus).
Overall, while there is a strong strategic rationale behind the deal, there is also increased complexity which may weigh on SPGI.

The gross spread is currently 2.7% for a deal that it is highly likely to close. I recommend setting up the spread in the usual way.

Hong Kong Exchanges and Clearing / Equity Bottom-Up

Hong Kong Exchanges and Clearing (388 HK)

*Joint Announcement For Stock Connect Expansion: Just when we thought that Hong Kong Exchanges &amp; Clearing (388.HK) [KKEx] had no other rabbits to pull out of its hat in 2020, the HKEx, Shanghai Stock Exchange (SSE), and Shenzhen Stock Exchange (SZSE) jointly announced further scope for Stock Connect expansion in early 2021 on November 27, 2020 regarding the STAR Market and biotech companies;  *Solid Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 3Q20 earnings of HKD 3.3 bn, improving HKD 376 mn (12.7%) linked quarter. Results were even more impressive when we exclude investment income (declined HKD 206 mn or 23.2% linked quarter) – increasing HKD 582 mn (28.0%) to HKD 2.7 bn; and*Peak Value: So much value has been derived on hope for the shares of HKEx, which included that on: southbound connect, futures markets,  structural reforms, and the change in CEO. As such, we have witnessed HKEx’s 2020 share performance of 44.4% that has resulted in a global exchange leading valuation of 10.4x P/BV.

*Joint Announcement For Stock Connect Expansion: Just when we thought that Hong Kong Exchanges &amp; Clearing (388.HK) [KKEx] had no other rabbits to pull out of its hat in 2020, the HKEx, Shanghai Stock Exchange (SSE), and Shenzhen Stock Exchange (SZSE) jointly announced further scope for Stock Connect expansion in early 2021 on November 27, 2020 regarding the STAR Market and biotech companies;  *Solid Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 3Q20 earnings of HKD 3.3 bn, improving HKD 376 mn (12.7%) linked quarter. Results were even more impressive when we exclude investment income (declined HKD 206 mn or 23.2% linked quarter) – increasing HKD 582 mn (28.0%) to HKD 2.7 bn; and*Peak Value: So much value has been derived on hope for the shares of HKEx, which included that on: southbound connect, futures markets,  structural reforms, and the change in CEO. As such, we have witnessed HKEx’s 2020 share performance of 44.4% that has resulted in a global exchange leading valuation of 10.4x P/BV. 

Hong Kong Exchanges & Clearing – Making Another Connection

*Solid Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 3Q20 earnings of HKD 3.3 bn, improving HKD 376 mn (12.7%) linked quarter. Results were even more impressive when we exclude investment income (declined HKD 206 mn or 23.2% linked quarter) – increasing HKD 582 mn (28.0%) to HKD 2.7 bn; and** Peak Value: So much value has been derived on hope for the shares of HKEx, which included that on: southbound connect, futures markets,  structural reforms, and the change in CEO. As such, we have witnessed HKEx’s 2020 share performance of 44.4% that has resulted in a global exchange leading valuation of 10.4x P/BV.

*Solid Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 3Q20 earnings of HKD 3.3 bn, improving HKD 376 mn (12.7%) linked quarter. Results were even more impressive when we exclude investment income (declined HKD 206 mn or 23.2% linked quarter) – increasing HKD 582 mn (28.0%) to HKD 2.7 bn; and** Peak Value: So much value has been derived on hope for the shares of HKEx, which included that on: southbound connect, futures markets,  structural reforms, and the change in CEO. As such, we have witnessed HKEx’s 2020 share performance of 44.4% that has resulted in a global exchange leading valuation of 10.4x P/BV.

Hong Kong Exchanges & Clearing – Strong Quarter, But Can It Continue?

United Kingdom

London Stock Exchange Group plc (LSEG) is a global financial markets infrastructure and data provider. The group offers services in data, analytics, capital formation, trade execution, clearing, and risk management. It is headquartered in London, England, and was created in October 2007 through the merger of London Stock Exchange and Borsa Italiana.

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London Stock Exchange Group (LSEG LN)

Video: Alternate sources of capital for life sciences companies - Edison Open House: Global Healthcare 2021

The variety of sources and volume of capital available to life science companies has never been more abundant. A panel of industry experts from...

Edison Investment Research

Singapore Exchange – Strains Seen For TW Futures

SINGAPORE EXCHANGE: November Stats Look Good Generally Across The Board; However, Taiwan Futures Slippage Could Impact A50.

Thomas J. Monaco

Financial Data Juggernaut

The deal should enhance SPGI's position as a proprietary data and solutions provider. Gross spread is currently 2.7%. I recommend setting up the...

Jesus Rodriguez Aguilar

Hong Kong Exchanges & Clearing – Making Another Connection

HONG KONG EXCHANGES & CLEARING: The Three Exchanges Have Added To The Stock Connect With STAR Market and Biotech Additions

Thomas J. Monaco

Hong Kong Exchanges & Clearing – Strong Quarter, But Can It Continue?

HONG KONG EXCHANGES & CLEARING: HKEX Results Were Great And We've Just Witnessed Vaccine Euphoria. How Much Higher Than 10.4x P/BV Can HKEX...

Thomas J. Monaco

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