Nick Train is “optimistic” about his major holding in London Stock Exchange, following a rebound in the company’s share price and signs its costly acquisition of Refinitiv is beginning to bear fruit.
Shares in the stock exchange leapt over 21% in March, a month which saw a “flurry of activity” for the group, including its first set of full year results since acquiring Refinitiv and the $1bn sale of a wealth technology platform.
This helped Train’s (pictured) £2bn trust play catch up with the FTSE All Share, after trailing its benchmark for two months in a row. On an NAV basis, FGT rose 1.5% last month compared to the index’s 1.3% return, while its share price edged up 0.9%.
Following LSE’s share price bounce back, it overtook Mondelez to become the trust’s third largest holding at 10.2% of the portfolio, behind Relx (12.7%) and Diageo (12.6%).
Train’s eponymous boutique Lindsell Train is currently LSE’s largest shareholder, with a 4.4% stake in the business.
LSE recovery has further to go
Writing in FGT’s latest factsheet, Train told investors he was “happy” for LSE “to remain a major holding” in the trust.
It hasn’t been smooth sailing for the stock exchange group, which has consistently been one of FGT’s biggest laggards over the past year.
Though investors were initially supportive of its acquisition of Refinitiv, confidence in the $27bn deal waned after LSE revealed the integration would be more costly and complicated than anticipated.
Even after the latest rebound, shares in the group are still down 18% from their peak price of £98 in February 2021, meaning its recovery is not yet complete, Train said.
See also: Nick Train touts share buybacks as Finsbury Growth & Income slumps
Revenue growth accelerating
However, Train said the rationale for the deal looks “ever more compelling,” adding that LSE’s latest set of results are “a promising early sign” its takeover of Refinitiv is starting to bear fruit.
Revenue growth across LSE’s individual segments has been gathering steam, Train noted, putting the company on track to achieve management’s target of 5-7% growth per year between 2020 and 2023.
Data & Analytics, now its largest business segment, saw revenue growth more than double from 2.5% in 2020 to just under 5.5% in 2021; while its Capital Markets arm, which includes Refinitiv’s ETFs and derivatives dealing platform Tradeweb, saw sales surge 12.5%. LSE’s smallest division Post Trade grew a “satisfying” 11%.
Benefits from ESG boom
Train flagged the company’s ability to benefit from the ESG boom as another “cause for optimism”. Increased demand for ESG data creates “considerable opportunities” for LSE’s Data & Analytics arm but less obvious areas of the business, such as Capital Markets, can also benefit
“Here LSE has a unique role to play in helping companies comply with the plethora of new ESG standards being imposed by regulators and governments, putting these companies into the ‘ESG compliant’ segment of the market, which then in turn makes it easier to raise money and lowers the cost of capital as market participants are confident that they genuinely are compliant,” Train said.
“In addition, LSE has been able to set up segment-spanning initiatives and subdivisions, eg green bond listings and benchmark parameters, within the data business and the indices.”
