BYMA 3Q 2019

Macro backdrop impacting on ADTV and AuC, risk-hedged investment portfolio stands out; rating: Market Performer

Bolsas y Mercados Argentinos (BYMA) recorded an inflation-adjusted 9-month profit of ARS 1,514 million (-46% y/y, inflation adjusted), due to a below-inflation growth in operating income. The results were mostly in line with expectations.

Regarding 3Q results, taking into account an annual inflation above 55%, the CSD income (Caja de Valores) grew 36% y/y in nominal terms to ARS 488 million, driven by coupon payments of bonds, which allowed to partially offset the impact of the 11% y/y fall in assets under custody. As for the exchange revenues (+49% y/y), although they grew below inflation level, market data sales growth (+75% y/y) continues to stand out. Additionally, the CEDEARs share in the equities’ traded volume increased, reaching 19% of the total trading volume of this segment during the first 9 months of 2019. There was also an increase in fees for short-term margin loan as well as for subscribers of the bilateral negotiation segment (SENEBI) who are also trading fixed income in the guaranteed segment. This increase would have a limited positive impact on revenues in the future (+ARS 6 to 7.5 million per quarter).

Inflation adjusted revenue fell 10.1% y/y. In nominal (historical) terms, trading volume is still affected, growing 4% y/y in equities and 44% y/y in fixed income, despite the recovery during the month of June. Assets under custody grew in pesos by 6% y/y, and dropped 1% t/t due to the peso appreciation. Operating expenses increased in line with inflation (+57% y/y), driven by costs denominated in dollars, related to consulting services and insurance.

Operating margin fell again, standing at 40% for the last 12 months. Management maintained its 50% operating margin goal, but 2020 was no longer mentioned as the target year to reach that level.

BYMA profited from the dollar appreciation against the peso by having 90% of its investment portfolio denominated in hard currency. Financial income from proprietary portfolio reached ARS 1,768 million (-9% y/y), seeking greater diversification in the composition of the portfolio. Additionally, ARS 504 million were generated from third party deposits.

Third quarter results reflect the Argentine macroeconomic and financial context’s difficulties, slightly mitigated by the company's efforts to develop new products and increase operational efficiency. We maintain the Market Performer rating.