It’s fair to say the ASX has a monopoly over Australian listed Investing. Yeah there’s the Chi-X, But ASX is no doubt the biggest and arguably only name in the game. So are ASX shares worth an investment, lets find out.
ASX Shares Prices
The ASX Ltd Share price is currently $76.43. This is down -13.73% over the course of a year. However ASX shares have proven to be an excellent long term investment, averaging 14.4% pa over the course of 10-years, and that’s excluding it’s excellent dividends.
About ASX Shares
I think we all know what the ASX is and does. The ASX or Australian Securities Exchange is Australia’s primary stock market. It was created by the merger of the Australian Stock Exchange and the Sydney Futures Exchange in July 2006 and is one of the world’s top-10 listed exchange groups measured by market capitalization.
Here’s more straight from the ASX: https://www2.asx.com.au/about
ASX Limited (ASX: ASX) is engaged in providing securities exchange and ancillary services, derivative exchange and ancillary services; central counterparty clearing services, and registry, depository, settlement and delivery versus-payment clearing of financial products.
The Company’s segments include prices and research, market products, trading services, listing and issuer services and education services. (Ref: Company profile Reuters)
The ASX Monopoly on Market Share
It’s no question the ASX is winning the monopoly of Australian security and derivative trading. However, CHI-X has grown rapidly from 0% claiming 18% volume, in less than a decade. Chi-X relies on ASX’s Clearing House Electronic Sub-Register System (CHESS) for clearing and settlement, so Chi-X serves as both ASX’s competitor and its customer. Source
The growth of CHI-X is also partly attributed to ASIC and the RBA. Following ASX platform crashes in 2020 causing outage for almost a full day of trading ASIC and RBA probed the need for less reliance on one monopoly. This was reported by the AFR.
Over the past five years, CHI-X has doubled its revenues and become profitable, growing at rapid speeds. There’s a good chance a lot of your trades have been executed through CHI-X, without you even knowing.
ASX Shares: Company Reports
ASX shares released their Half-Yearly report in February 2021.
- EBIT up 1.3% to $319.1m; however, interest earnings reduced due to lower rates – NPAT down 3.4% to $241.8m.
- Operating revenue up 3.4% to $470.5m – growth in listings and equity activities balancing downturn in futures.
- Solid result achieved in mixed conditions reflecting strength of diversified business.
- Higher capital investment reflecting long-term transformation of technology and operations.
- Lower interim dividend in line with reduced NPAT – down 3.4% to 112.4cps – 90% payout ratio maintained.
Listings and Capital Raisings In HY21, the total capital raised was $52 billion, up 24% on the previous corresponding period (PCP), and recovering well from COVID. ASX Reports an amazing 85 IPOs during this period.
Trading – Cash Markets (including equities, interest rate, and warrant trades) trades were 2,584 Billion 9.5% higher than the PCP. Volatility (as measured by the average daily movement in the All Ordinaries Index) was 4.1% in March 20 (compared to 0.3% in the PCP). Expected future volatility (as measured by the S&P/ASX 200 VIX) in March was an average of 36.6 (compared to 12.1 in the PCP)
Trading – Futures Future contracts were at 73 Million, down slightly from the previous years.
ASX delivered solid revenue growth of 3.4%, up $15.6 million to $470.5 million on the same time last year. However, materially lower interest earnings due to the interest rate environment saw statutory profit dip to $241.8 million, down 3.4% or $8.6 million.
ASX Shares: Dividend History
Over the past decade, ASX shares have managed to maintain a steady flow of income for investors, with an exception to the COVID dip. Here’s their extraordinary history.
ASX typically announces a dividend with the release of its half-year results in February and full-year results in August as seen in their financial calendar. Dividends are typically paid twice a year, in March (interim dividend) and September (final dividend).
ASX has paid biannual dividends every year since 1999. This included during the GFC in 2008 and the COVID-19 recessionary period. All dividends paid by ASX during this time have been fully franked. They do not offer a Dividend Reinvestment Plan (DRP).
What is ASX dividend policy?
ASX seeks to:
- pay cash dividends at strong and sustainable levels;
- target a full-year payout ratio of 90%
This dividend payout ratio is relatively high, however, with the ASX monopoly, it is likely acceptable to maintain a high payout ratio rather than targeting massive growth.
Past and Present Dividend Yields
CBA is currently paying a dividend of $2.349 per share, fully franked at $3.3557 per share. At the current price, this gives ASX has a net dividend yield of 3.07% and a gross dividend yield of 4.39%.
It is important to note these amounts have been dramatically impacted by the COVID economic environment. We can see prior to these events ASX has a steadily growing dividend averaging $5.11 gross.
ASX Shares: Fundamentals
|Volume 4W Avg||416,988|
|NTA per Share||6.13|
ASX Shares: Technical Analysis
In summary, the upside is likely to prevail as long as $74.1 is supported. The alternative scenario is that a downside breakout of $74.1 would call for 73.48 and $72.51.
Here’s a breakdown of the detailed Technical Factors;
ASX Shares: Prophet’s Take
We have watched ASX shares closely for over 3-years and regrettable never brought in. All-in-all the ASX is clearly an excellent company with very little debt and a monopoly on the Australian financial markets which is obviously an excellent financial moat.
ASX fundamentals leave it slightly over-priced. But given its excellent structure, there is obviously a premium to pay for ASX Shares. We think the current price is In-Range.
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