First equity research since IPO puts ‘Buy’ on Moscow exchange

BCS Financial Group, an independent Russian financial institution, has initiated equity research coverage of The Moscow Exchange (market cap $4bn) with a ‘Buy’ rating, a twelve-month target price of RUB68 and an upside of 26%.

BCS is the first broker to initiate equity coverage of The Moscow Exchange since its IPO on 15 February 2013.

The broker said the business model was strongly diversified, and offered a way for investors to get exposure to reform-based growth expected in Russia’s financial markets.

Modernisation of the country’s financial infrastructure is ongoing, and further IPOs of domestic firms are expected to support volume growth.

Risks remain, such as business model changes, competition and country risk, which BCS said justifies a discount to peers.

Olga Naydenova, senior financial analyst, said: “The Moscow Exchange is a play on financial infrastructure reform, the success of which should help attract financial flows to the Russian market.”

“The changes to a more modern financial infrastructure should help repatriate flows from international exchanges trading Russian assets, reducing the risks of participants as well as their costs. The Exchange is also focused on the development of new products, mostly of underpenetrated derivatives, which should also be supportive for revenue.

“The Moscow Exchange could benefit from government initiatives to establish Moscow as one of the global financial centres.”


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