Analysts at Goldman Sachs (NYSE:GS) have increased their price target for ASX Limited (ASX: ASX), the operator of the Australian Securities Exchange, to AU$59.50 from AU$55.45. This revision reflects the brokerage's confidence in the company’s strategic initiatives and financial outlook.
Addressing Key Issues
Goldman Sachs analysts highlight that critical issues regarding ASX’s capital and operating expenditures have been addressed heading into FY25. The exchange operator has been focusing on refining its capital allocation and controlling operating costs, ensuring a more efficient financial structure.
Technology Revamp and Capex Plans
A significant factor in the increased price target is ASX's ongoing technology revamp and the replacement of its Chess Programme. This modernisation effort is expected to drive elevated capital expenditures (capex), estimated between AU$160 million ($108.29 million) and AU$180 million per annum from FY25 to FY27. These investments aim to enhance the technological backbone of the exchange, ensuring it remains competitive and reliable.
Expense Growth Projections
Goldman Sachs also projects a notable increase in expenses for FY24, expecting them to grow by approximately 15% compared to FY23. This rise in expenses is attributed to the continued investment in technology and infrastructure upgrades.
Improved Collateral Balances
The analysts further note that collateral balances are expected to improve over the second half of FY24, which should support interest income. This improvement is anticipated to bolster ASX’s financial performance and provide a stable income stream.
Stock Performance
As of the last close, ASX Limited’s stock has risen by 2.1% this year. This modest gain reflects the market’s cautious optimism about the company’s ongoing efforts to modernise its operations and address key financial issues.