SGX - RHB Invest 2017-07-28: FY17 SADV Increases Marginally YoY

SGX - RHB Invest 2017-07-28: FY17 SADV Increases Marginally YoY SINGAPORE EXCHANGE LIMITED S68.SI

SGX - FY17 SADV Increases Marginally YoY

  • Singapore Exchange (SGX)’s FY17 net profit dipped 3% YoY to SGD340m. Excluding one-off items, core net profit would have been SGD347m. 
  • Whilst its FY17 SADV of SGD1.12bn was marginally higher than FY16’s, its DADC declined 10% YoY – with the main reason for this being the plunge in China A50 Index futures. 
  • A final DPU of SGD0.13 was declared, taking its FY17 DPU to SGD0.28 (unchanged YoY). 
  • We maintain our FY18F SADV of SGD1.35bn, as we expect the improvement in the value to continue. We also believe the Dec 2016 implementation of the Shenzhen-Hong Kong Stock Connect scheme could improve trading contracts for the China A50 Index futures. 
  • We maintain our FY18F-19F earnings and TP of SGD9.00 (19% upside). Maintain BUY.



Highlights of Singapore Exchange’s (SGX) results. 

  • FY17 (Jun) net profit was SGD340m, which is close to our forecast of SGD356m. If we exclude a one-off loss of SGD4m from the disposal of its investment in the Bombay Stock Exchange, and one-off acquisition costs of SGD3.7m for the Baltic Exchange, core net profit would have been SGD347m.
  • FY17 securities average daily value (SADV) of SGD1.12bn was marginally higher, compared with FY16’s SGD1.1bn. Its 4QFY17 SADV of SGD1.16bn was slightly higher than the FY17 average.
  • FY17 derivatives average daily contracts (DADC) decreased 10% YoY to 659,000, largely due to a 24% fall in FTSE China A50 Index futures traded YoY, to 64m contracts. This contributed to derivatives revenue dropping 7% YoY to SGD303m (or 38% revenue share).
  • It declared a final DPU of SDG0.13, in line with its policy. We expect FY18F DPU to be SGD0.334, which implies a yield of 4.4% - which is higher than the Singapore sovereign 10-year bond yield of 2.11%.


Other takeaways. 

  • We maintain our FY18F SADV and DADC assumptions of SGD1.35bn and 794,000 respectively. 
  • For the derivatives portion, we expect to see an increase in China A50 Index futures trading volume, thanks to the Dec 2016 implementation of the Shenzhen-Hong Kong Stock Connect. We also forecast FY18 net profit to grow 15% YoY, driven by volume expansion.
  • We make no change to our forecasted numbers and TP of SGD9.00 (pegged to 24x FY18F EPS). 
  • Our secondary valuation methodology using DCF (WACC: 7.6%, TG: 1.6%) yields a close fair value of SGD8.79.






Leng Seng Choon CFA RHB Invest | http://www.rhbinvest.com.sg/ 2017-07-28
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 9.000 Same 9.000



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