Strong Growth Prospects Driven by Innovation, Acquisition, Regulatory Changes and Emerging Economies
Markit Ltd. (MRKT) was formed in 2003 and now provides financial information to about 3,000 institutional customers (banks, asset managers, insurance firms and clearing houses) across 10 countries, with annual revenues of about $1 billion. The company has a strong track record of value creation through organic growth, strategic investments and accretive acquisitions, with 2009-2013 revenue growth of 19%. In its most recent quarter (Q1 2014), adjusted earnings were up 53.5%. Markit does not plan on paying dividends.
Markit is a trusted partner to its diversified global customer base and has significant growth opportunities – organic and acquisition-driven – that should propel low double-digit revenue growth with mid-40% Adjusted EBITDA margin. The company is led by its founders whose interests are strongly aligned with shareholders.
Markit’s products and services are deeply embedded into its customers’ systems and processes, and are integral to their operations. Markit provides information related to securities pricing, indices, valuation, trading, trade processing and managed services. Markit’s information is used by capital markets’ participants (such as traders, researchers, fund managers and risk managers) and for back office activities (such as trade settlement, operations and compliance).
For example, Markit’s pricing data is extensively used across global bond and derivatives markets. About 50% of Markit’s revenues come from the U.S., 40% from the European Union and about 10% from other regions. Approximately 95% of the company’s revenues are from recurring fees.
The company has three business divisions – Information, Processing and Solutions, with Information delivering about half of revenues and Solutions driving growth. The Information division provides critical financial market information (such as pricing data, indices, valuation and trading data); the Processing division does trade processing for over the counter derivatives, foreign exchange and syndicated loans through its multi-asset-class trade confirmation and settlement platform; and the Solutions division provides enterprise software and managed services to clients.
Markit is strongly positioned and deeply entrenched in an industry niche, and has solid growth prospects tied to key regulatory changes in the financial services industry and to the strengthening of capital markets in emerging and developed economies.
Markit’s competitive strengths include the range, depth, cost-effectiveness, timeliness, ease-of-use and relevance of its products and services. The company’s Information division primarily competes against financial data providers Bloomberg, FactSet, IDC and Thomson Reuters; its Processing divisio