SGX - 2QFY17 Results Flash Note
- 2QFY17 net profit of SGD88m was up 5% YoY. 1HFY17 net profit of SGD171m represented 45% of our FY17 net profit forecast of SGD385m.
- 2QFY17 securities average daily value (SADV) of SGD1.09bn was up 17% YoY, and up 10% QoQ.
- 2QFY17 derivatives contracts traded of 41.4m is up 5% YoY. The weakness for China A50 Index futures is more than offset by gains in other segments such as the Nifty 50 Index futures, MSCI Singapore Index futures and iron ore futures.
- Derivatives accounted for 38% of total revenue (down from 2QFY16’s 40% previously).
- Interim dividend of 5 cents per share was declared – in line with stated policy. We are forecasting FY17 dividend of 32 cents, giving a yield of ~4.5%, which is higher than Singapore sovereign 10-year bond yield of 2.3%.
- Excluding one-off costs from the acquisition of the Baltic Exchange, expenses would have been 4% lower at SGD94m.
- Management indicated that cost discipline will remain a key focus and operating expenses are expected to be SGD405 – 415m (SGD15m lower than the previously announced range).
- BSE application for IPO (and SGX's intention to tender these shares in the IPO) may result in a one-time loss of SGD2m - the impact is not material for SGX's EPS and NTA.
- We maintain our FY17 SADV and DADC assumption of SGD1.27bn and 782k respectively. We see continued robust early Jan2017 SADV as a positive development. For the derivatives portion, we see greater China A50 Index futures trading volume with the Dec 2016 implementation of the Shenzhen-HK Connect.
- We forecast FY17 net profit growth of 10%, driven by volume expansion.
No change to our forecast.
- TP of SGD9.10 (pegged to 25x FY17 EPS) is maintained.
- Secondary valuation methodology using DCF yields a slightly higher SGD9.20 TP – based on 8.2% WACC and 1.6% TG.