Custodian comments on ENX’s CSD offering are constructive; Where do we go from here?
ENX moves into CSD testing phase with custodians
Euronext issued a press release Wednesday morning, announcing the launch of a testing phase with custodians for its planned CSD Expansion into France, Netherlands and Belgium, including quotes from three leading custodians (BNP, Citi and CACEIS). Key Takeaways: 1) this is the first time named custodians have confirmed connectivity to ENX’s new CSD offering; 2) the public confirmation of large custodians connecting to ENX should encourage/prompt other large custodians to connect to ensure client offerings are aligned among competitors.
Consensus forecasts imply ENX captures only 5-10% share; UBSe: 45-50%
Consensus forecasts imply ENX secures only 5-10% of the TAM while we forecast 45-50% share in 2028E. If ENX captures 45-50% market share, there is 7-8% upside to consensus 2027-28E EPS. In our upside scenario, where ENX captures 90% market share, we calculate 16% upside to 2028E consensus EPS. With the costs of this opportunity already factored into consensus, we think the risk-reward related to the CSD opportunity is firmly skewed to the upside.
We are also bullish on European equity volumes
The CSD opportunity accounts for about two-thirds of our 10-13% above-consensus 2027-28E EBITDA. More than half of our remaining above-consensus estimates comes from cash equities. We expect cash equity volumes to remain robust throughout 2026 and into 2027, driven by solid inflows into European equity products over the past 16 months. While volumes have normalised from elevated levels in March, the current run-rate is mid-teens percentage higher than average 2025 levels.
Valuation: We reiterate our Buy rating; €168/share price target
Euronext trades less than 15x our 2027E EPS, well below its historical average of 16x. Given the better diversification of the business, the cash equity upcycle and potential tailwinds from the CSD Opportunity, we argue the shares should be trading at 18x forward P/E.
