Deutsche Boerse Share Price (0H3T)

Business Deutsche Börse AG is a Germany-based international financial marketplace operator. The company offers electronic trading systems for buying and selling of securities on stock exchanges in Europe. It operates four business segments: Xetra; Eurex; Clearstream, and Market Data & Analytics.

Bull • Further cost reductions. • 5% dividend yield. • Discount to peers. Bear • Regulatory change. • Lower trading volumes. • Market uncertainty.

Valuation: Consensus forecasting growth Based on consensus, the company trades on a FY13e P/E of 12.0x, representing a c 20% discount to peers (LSE: 14.0x, NYSE Euronext: 15.9x) and is underpinned by a FY13e dividend yield of 5%.

Efficiency measures creates flexibility for investing Deutsche Börse is being proactive and is planning to generate €70m of annualised cost savings by 2016, nearly 8% of the 2012 underlying cost base. This should be sufficient to offset inflationary pressures although we expect Deutsche Börse to additionally invest in the business during this period. Maintaining leadership requires consistent investment in products, services and technologies.

Challenging market conditions Volatile markets in 2012 suppressed trading volumes. Risk measures are beginning to normalise and there are tentative signs in early 2013 of improvement, with a small increase in Eurex volumes year-on-year, although cash equities are further down. Beyond cyclical recovery, the main uncertainty for investors remains the shape and impact of proposed regulatory changes. The negative impact of the proposed EU financial transaction tax (FTT) remains unclear. The EC updated its proposals on 14 February and it is planned that member states should enact legislation by September 2013. The current proposals have the potential to significantly reduce derivative trading volumes in particular, but are likely to evolve in negotiations over the next few months. More positively, the European Markets Infrastructure Regulation (EMIR) should be favourable to Eurex by forcing the clearing of OTC derivatives through a Central Clearing Party.