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TMX Group stock wins price target raise at Scotia

VettaFi TMX

A new development at TMX Group (TMX Group Stock Quote, Chart, News, Analysts, Financials TSX:X) has Scotia raising its price target on the stock.

As reported by the Globe and Mail, Scotia analyst Phil Hardie December 15 raised his price target on X from $33.00 to $35.00, while maintaining his “Sector Perform” rating on the stock.

The move is in response to the December 14 news that TMX would acquire the rest of New York-based capital markets data firm VettaFi Holdings LLC. The additional 78 per cent stake -which X will pay (US) $848-million for- gives the Canadian exchange 100 per cent ownership.

“The acquisition of VettaFi will add a dynamic new component to our growing information business, with an exciting set of capabilities and a visionary, innovative team committed to client success,” said TMX CEO John McKenzie. “The experience of working together this year has confirmed that TMX and VettaFi are a powerful combination and a tremendous culture fit. Moving forward, the addition of VettaFi increases the depth and value of data-driven insights we provide to clients, expands our digital expertise and enriches our industry-leading support for ETF issuers. From a strategic standpoint, this acquisition accelerates TMX’s long-term global expansion, and increases the proportion of revenue derived from our Global Solutions, Insights and Analytics division, and from recurring sources.”

The analyst says the deal could allow the TMX to close the valuation gap between it and its peers.

“We like the transaction given that we believe it 1) accelerates TMX’s strategy and transformation, 2) adds a new growth engine in a high-value segment, and 3) is financially accretive,” Hardie said. “The stock has rallied over recent weeks and while the initial stock reaction to the deal appears relatively tepid, we believe the transaction will add far more shareholder value. We expect the benefits from an accelerated shift toward a greater portion of recurring revenue, and additional growth provided by the new platform, to contribute to stock re-rate with TMX closing its relative valuation gap to Nasdaq and its global exchange peers.”

Shares of TMX Group closed December 14 at $30.98.

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