Singapore Exchange - Multi-Asset Platform Strategy Paying Off
- Singapore Exchange (SGX) reported core net profit of S$232.7m in 2HFY22 (1 Jan 2022 to 30 Jun 2022, +6% q-o-q, +12% y-o-y) – in line with our/consensus estimates. Correspondingly, FY22 net profit of S$451.4m (+1% y-o-y) formed 102%/100% of our/consensus full-year forecasts.
- Operating revenues rose 8% y-o-y in 2HFY22. This was driven by the fixed income, currencies and commodities (FICC) (+23% y-o-y) and equities derivatives (+20% y-o-y) segments, but offset by weaker cash equities (-7% y-o-y).
- The strong showing of FICC was driven by a 21% y-o-y rise in commodities derivative volumes while its OTC FX ADV rose 64% y-o-y to US$70.6bn; it is on track to meet SGX’s aim of US$100bn ADV in the medium term.
- Higher volumes from the China A50 and Nifty 50 index futures were the key drivers of SGX's derivatives business.
- In the cash equities business, weaker sentiment resulted in total traded value dipping 6% y-o-y.
- Considering that full-year operating expenses of S$562m (+7% y-o-y) incorporated expenses related to the consolidation of MaxxTrader, costs were still below SGX’s guided range of S$565m-575m for FY22.
- Going forward, SGX expects operating expenses to rise ~7-9% in FY6/23F to factor in higher expenses for the build-out of its OTC FX business and rising staff costs, before normalising to mid-single-digit growth in the medium term.
- While we expect treasury income to drive sequential earnings growth in FY23F given the higher interest rates, we believe that this has been priced in and downgrade SGX to HOLD. Our target price of S$10.40 is unchanged,
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
Andrea CHOONG CGS-CIMB Research | https://www.cgs-cimb.com 2022-08-19 2022-08-19
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