Deutsche Boerse Hits Guidance Despite Eventful Year; Fair Value Estimate Maintained

Wide-moat Deutsche Boerse reported full-year net income of EUR 1.2 billion, ahead of the EUR 1.1 billion we had expected. We maintain our fair value estimate of EUR 150 per share. Performance through the year was in line with guidance, although volatile markets had mixed effects on Deutsche Boerse’s business segments. High market activity has been a boon for equity index derivative-related revenue, up 12% versus the prior year, supporting a good year in the trading and clearing segment Eurex. Over-the-counter, or OTC, clearing benefited from the uncertainty around the U.K. obtaining equivalency from the European Union. Deutsche Boerse now captures 20% of OTC euro-denominated interest swaps. The increased trading activity also lifted revenue in the cash equities business, with trading and clearing up 34% and data up 13%. On the other hand, lower interest rates in the U.S. have slashed net interest income from EUR 188 million to EUR 101 million in Deutsche Boerse’s Clearstream business. This was partially offset by higher custody and settlement revenue. The remaining segments showed a good performance with the commodity business growing the top line 4% and the foreign-exchange business 10%. Its index and analytics business, one of its core growth drivers, showed a 7% revenue increase on an organic basis. In sum, net revenue grew by 9% and EBITDA by 12% to EUR 1.9 billion. Management communicated guidance for next year for net revenue of EUR 3.5 billion and EBITDA of EUR 2 billion.