2025 Outlook_ Brightening up – cycle bottom to outweigh potential US tariffs

Summary of HKEx Conference Call Company and Industry Overview - The conference call discusses the performance and outlook of Hong Kong Exchanges and Clearing Limited (HKEx) [1][3][19]. Core Points and Arguments - Long-term Trading Activity Support: Several factors are expected to support trading activity in capital markets from a long-term perspective [1]. - Revenue Challenges: Geopolitical uncertainties, particularly related to the new US administration's policies and potential tariff hikes, pose risks to HKEx's revenue [3]. - Revenue Forecasts: Revenue expectations for HKEx are projected to increase by 2.7% for 2024 and 4.5% for 2025, driven by higher average daily volume (ADV) assumptions [4][8]. - Earnings Per Share (EPS) Adjustments: EPS forecasts have been raised by 4% for 2024, 6.9% for 2025, and 7.4% for 2026 due to increased revenue expectations [4][8]. - Market Capitalization Growth: Market cap growth is expected to be -25.6% in 2022, -5.9% in 2023, and then recover to 5.0% in 2024, 12.0% in 2025, and 15.0% in 2026 [7]. - Price Target Adjustments: The price target for HKEx has been raised to HK$310, reflecting a more favorable economic outlook [8][19]. Financial Metrics - **Average Daily Volume (ADV)**: Projected ADV is HK$135 billion for 2024 and HK$150 billion for 2025, with a velocity of 93$22,890 million in 2024, HK$23,767 million in 2025, and HK$25,301 million in 2026 [8][17]. - Profitability Ratios: The EBITDA margin is projected to be 72.3% in 2024 and 73.2% in 2025, with a return on equity (ROE) of 25.55% in 2024 [21][22]. Risks and Considerations - Geopolitical Risks: Rising geopolitical uncertainties could negatively impact revenue and trading activity [3][19]. - Market Conditions: The potential for a sharp pickup in market conditions and IPO activity is noted as a risk to the downside [24]. - Regulatory Environment: Changes in regulations affecting IPOs and market liquidity could pose risks to revenue [24]. Additional Insights - Investment Drivers: The call highlights the importance of market turnover, IPO listings, and recurring listing fees as key drivers of revenue [24]. - Consensus Rating: The consensus rating distribution indicates a majority overweight position on HKEx, with a significant portion of analysts maintaining a positive outlook [19][24]. This summary encapsulates the key points discussed during the HKEx conference call, providing insights into the company's performance, forecasts, and the broader market context.