Q: Any thoughts on OTCM (OTC Markets Group)? Trading around its 52-week low but it has been a solid compounder over the years. Is this a buying opportunity for long-term hold?
5i Research Answer:
We like OTCM, we think it is a high-quality business with decent organic growth over the years (high single-digits) without any meaningful acquisitions. It has a solid balance sheet with no long-term debt, and a track record of paying special dividends occasionally. It trades at a fair valuation of 18.5X forward P/E, although it does trade OTC and has thin trading volume. If we are to see an expansion in the small-cap indices and investors moving out the risk curve as interest rates fall, we could see OTCM perform well in the coming years.
We also like X as a similar Canadian business, and it operates as a quasi-monopoly Canadian exchange.