The Dubai Financial Market company is set to be a significant beneficiary of renewed investment in local listed companies, analysts said.
DFM, the Arab world's only listed bourse, has seen turnover for the first quarter of this year so far of Dh17 billion. This is the highest since the second quarter of 2010 when it recorded turnover of Dh22.5bn.
Based on this performance, analysts at Al Masah Capital believe DFM will probably record trading revenue between Dh75m and Dh85m for the first quarter.
To put this into perspective, it would compare with trading revenue of Dh20m in the fourth quarter of last year, the same amount the quarter before, Dh51m in the second quarter and Dh34m in the first quarter of last year. In other words, analysts are expecting a marked improvement in results at DFM.
From a company perspective, DFM has embarked, or is about to embark, on several money-spinners. It started selling subscriptions to price data that were previously free. DFM is also looking at introducing new products and services, including derivatives trading and short selling, in an attempt to boost revenues.
It is important to note, as Al Masah analysts do, that the fate of the company's profitability will hinge on trading revenues for the foreseeable future, probably one to two years.
Broader equity analysts are optimistic the recent surge in interest in equities, which has seen the DFM General Index rise 22.32 per cent since January, will continue. DFM also benefits from a loyal retail trader following.
On a pure valuation perspective, with a 2013 forward-looking price-to-equity (PE) ratio of 46 times, and a forward PE of 76 times for this year, Al Masah reckons DFM is expensive.
"With an average analyst fair value estimate of 0.66, it can be seen as a pure speculative play. With the biggest issue valuing this stock being the lack of visibility on turnover, most investors tend to look at it with a very short-term perspective," the analysts said.
Alongside volume and activity levels determining DFM's price, any traction on a possible merger of the UAE bourses will also add spice, although the current valuation could be an obstacle to any counter-party interest in a deal.