Summary
Stock: IG Group Holdings PLC (LON: IGG) common equity
Date: July 4, 2022
Market cap: £2.95bn
Rating: Buy
Price: £6.84
Target: £14.03
Setting the stage
IG Group is an online brokerage. The company facilitates trading of over-the-counter (OTC) derivatives and other financial securities like stocks. The firm makes money by charging a commission or spread on trades. It gets 40% of its revenue from Britain, 18% from Europe, 13% from Australia, 11% from the US, 8% from Singapore, 7% from Japan and 3% from South America.
The global OTC derivatives market is enormous but stagnant. According to the Bank for International Settlements (BIS), an authority on global credit data, the notional value of all OTC derivatives outstanding worldwide is almost $600trn. This value is down from its $710trn peak in 2013 but comparable to where it’s been for the past decade. The derivatives market is so massive that it’s almost six times the size of global public equities markets.
Hedgers are the primary market …