Morningstar has reduced its fair value estimate for ASX Limited by 5 per cent to $73 per share following another operational failure on Monday. The outage disrupted the publication of announcements for approximately 80 companies, causing ASX shares to decline by around 3 per cent. ASX Limited operates Australia’s primary securities exchange, providing trading, clearing, and settlement services. The company plays a vital role in the country’s financial markets infrastructure.
According to Morningstar equity analyst Roy Van Keulen, the latest incident is anticipated to extend regulatory scrutiny of the exchange, adding to a series of operating failures in recent years. Van Keulen expects this will prevent ASX from increasing prices in the near future, while simultaneously requiring increased spending on system infrastructure to satisfy regulators and market participants. The analyst emphasized that these ongoing issues are impacting investor confidence.
Consequently, Morningstar has lowered its earnings forecasts for ASX by 5 per cent and 8 per cent for fiscal years 2027 and 2028, respectively. However, the firm anticipates that margin expansion will resume from fiscal year 2029. Despite the downgrade, Morningstar maintains that ASX shares are still materially undervalued, suggesting the market is pricing in the assumption that operational problems will continue indefinitely.
Van Keulen stated that ASX’s long-term competitive position remains intact, arguing that occasional system failures have a relatively insignificant long-term impact. He added that competition would offer limited benefit in a market where such risks are inherent in any technology-driven exchange. Regulatory scrutiny of ASX intensified after the company abandoned its CHESS replacement program in 2022 after delays and increased costs.
