Interactive Investor

Analyst thinks Microsoft and Nick Train are right to back LSE

2nd March 2023 16:22

by Graeme Evans from interactive investor

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Shares in London Stock Exchange Group have been unimpressive, but one City expert thinks its big backers will get their reward one day.

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Shares in the Microsoft (NASDAQ:MSFT) and Nick Train-backed London Stock Exchange (LSE:LSEG) continued their recent struggles today, even as a City bank forecast a 30% upside in the wake of full-year results.

LSE’s shares were lower for most of the session and little changed on where they stood prior to December’s announcement of a strategic partnership with Microsoft.

The alliance, which has seen the tech giant take a 4.2% stake in LSE, was described as a significant milestone and one that chief executive David Schwimmer believes will transform the experience for customers of the financial markets infrastructure and data provider.

Fund manager Nick Train, whose Finsbury Growth & Income (LSE:FGT) Trust has LSE as its fourth-biggest holding, called the partnership a massive endorsement of LSE’s strategy and potential of its assets.

The move has failed to kickstart shares, however, with LSE significantly below the level seen in January 2021 of just below 10,000p and 8,500p as recently as last summer.

One factor has been uncertainty over January’s expiry of lockup agreements on shares held by Blackstone and Thomson Reuters following their sale of data business Refinitiv.

LSE said today it planned to seek AGM approval for a buyback focused on the shares held by  the consortium, with a value of up to £750 million by April 2024.

The company is already half way through a separate £750 million buyback programme and said today it would increase its full-year dividend by 12.6% to 107p a share. The award came as LSE revealed a 38.8% rise in annual profits to £1.24 billion and issued new guidance for income growth on a constant currency basis of 6-8%.

That compared with a previous guidance range of between 5%-7% and followed 2022’s growth rate of 6.6% when adjusted for the impact of the Russia/Ukraine war.

Having integrated Refinitiv and significantly improved its performance, Schwimmer said the resilience of the business model and quality of earnings was “becoming increasingly clear”.

His comments were backed up by analysts at Bank of America, who today highlighted a price target of 9,500p following the results.

They added: “Overall, this is a supportive set of numbers underlining the company’s high quality business and improving growth profile.”

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