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The UK blue chip index continues its march towards an all-time high. A 4% rally since early 2023 has the Footsie flirting with its record of 7,903 points, set in May 2018. Despite this, one FTSE 100 The stock in particular still looks like a good value to me in the long run.
Big data and analytics
He London Stock Exchange Group (LSE: LSEG) owns and operates the London Stock Exchange. It also owns several other stock market-related assets, including Refinitiv, Tradeweb, and FTSE Russell. The Group’s current corporate appearance was consolidated in 2007 when it merged with Borsa Italiana (the Milan Stock Exchange).
But eyebrows were raised when the company announced it would acquire data and trading firm Refinitiv in 2019. It paid $27 billion, its biggest acquisition to date.
Group CEO David Schwimmer has said he advised on hundreds of transactions in his previous role at Goldman Sachs. But it’s hard for him to think of just one.”as transformer and value creatorsuch as the company’s acquisition of Refinitiv.
Now the second largest provider of market data after Bloomberg, Refinitiv has a client base of 40,000 financial institutions in 190 countries. The combination of the London Stock Exchange Group and Refinitiv creates a truly world-class operation in terms of scale and comprehensive data offerings.
While I think the acquisition is smart, that’s not to say the huge price tag isn’t risk-free. One is that the company’s net debt now stands at £5.7bn, which is a tenfold increase in just five years.
microsoft association
Last year, the tech giant Microsoft announced that it had acquired a 4% stake worth $2 billion in the company. For its part, the Group has committed to spend a minimum of $2.8 billion with Microsoft on cloud-related services. This will involve a significant upgrade to the company’s infrastructure, including the Refinitiv platform.
Many analysts now anticipate that the planned transformation of the Refinitiv platform may well challenge Bloomberg’s market dominance.
As for the stock, it is currently much cheaper than in recent years. It now has a forward price-earnings (P/E) ratio of 21. In 2021, the P/E stood at 38.
The stock price is down 18% in the past two years. A share now costs just over £74, compared to £98, reached in February 2021.
initial public offering pipeline
There was a sharp drop in initial public offerings (IPOs) in the UK last year, due to economic uncertainty caused by the war in Ukraine. But Schwimmer has said that there is a “healthy pipeline” from companies waiting for markets to stabilize before going public in London.
Simply put, more IPOs mean more opportunities for the company to make money.
There are some interesting UK companies in this line of potential IPOs. These include craft beer chain Brewdog and Revolut, the fintech startup hoping to get a UK banking license. In addition, semiconductor giant ARM Holdings is rumored to be relisted on the London Stock Exchange.
I am looking forward to kicking the tires on these potential investments when the opportunity arises. In the meantime, I also have a good portfolio of stocks that I want to invest in. So I put LSEG stock on my watch list until I have more capital to deploy. But I hope to own shares sooner rather than later.
