UPDATE 2-Toronto Stock Exchange owner's profit up on trading uptick

Wed Feb 5, 2014 10:15am EST
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By Alastair Sharp

TORONTO Feb 5 (Reuters) - TMX Group Ltd, the owner of Canada's main stock exchange, on Wednesday reported a fourth-quarter profit well above analysts' estimates as trading activity showed early signs of recovery.

TMX, which owns the Toronto Stock Exchange, has struggled to offset the cyclical swing away from commodities as resource companies play a major role in issuance in Canada.

The company said it had benefited from lower financing costs after restructuring its long-term debt and that the rising U.S. dollar had boosted revenue from greenback-denominated accounts.

A group of Canadian financial institutions bought TMX in September 2012 and combined it with the smaller Alpha stock exchange and the trading clearinghouse Canadian Depository for Securities Ltd.

Analysts praised the results, the first to offer comparable year-earlier figures after the deals closed, but expressed caution about the challenging state of Canadian capital markets.

"Robust free cash flow and a high degree of operating leverage likely position TMX as an attractive play on a capital markets recovery," Scotiabank analyst Phil Hardie wrote in a note, adding that the trading environment would likely remain tough.

Net profit attributable to TMX's equity holders rose 27 percent to C$41.4 million ($37.4 million), or 77 Canadian cents per share, from C$32.6 million, or 61 Canadian cents per share, a year earlier.   Continued...