SGX - OCBC Investment 2017-07-28: Muted Earnings Outlook

SGX - OCBC Investment 2017-07-28: Muted Earnings Outlook SINGAPORE EXCHANGE LIMITED S68.SI

SGX - Muted Earnings Outlook

  • Decline in Derivatives continued.
  • Prudent cost management.
  • Current yield is 3.7%.



Earnings were slightly below expectations 

  • Singapore Exchange (SGX) posted 4QFY17 net earnings of S$85.2m, +10.9% YoY and +2.6% QoQ. This led to full year earnings of S$339.7m, slightly below Bloomberg consensus estimate of S$347.3m. 
  • Excluding one-off items, net profits would have been S$347.4m. 
  • Its Equity and Fixed Income (EFI) revenue, which accounted for about 51% of total revenue in FY17, was flat for the year although listing revenue was boosted by a record number of bond listings (raising some S$384.7b). 
  • Derivatives revenue fell 6.8% to S$303m in FY17, largely due to a drop in volume as the number of contracts declined 10%. 
  • Market Data and Connectivity bucked the downtrend and posted a 7% rise in revenue for the year. 
  • A final dividend of 13 cents was declared, making full year payout of 28 cents (same as last year). This will be payable on 6 Oct 2017.


Guiding for expenses of S$425m-S$435m 

  • Management is guiding for FY18 operating expenses of S$425m to S$435m (actual FY17 expenses of S$399m, which was below management’s guidance for the year), and technology-related capital expenditure of between S$60m-S$65m (slightly below FY17’s guidance). 
  • Contract processing revenue fell 27% to S$11.6m in FY17 largely due to a drop in the number of contracts processed. Going forward, this amount will continue to dip as brokers migrate to their own back office systems.


Increasing FV from S$7.53 to S$7.83 

  • Despite uncertainty in the market, Asian equities have done well so far this year and valuations have edged higher. 
  • We roll our valuation into the new financial year and based on peers’ average forward PER of 23x, we raise our fair value estimate from S$7.53 to S$7.83. 
  • At SGX's current share price, the dividend yield is 3.7%. Maintain HOLD.




Carmen Lee OCBC Investment | http://www.ocbcresearch.com/ 2017-07-28
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 7.830 Up 7.530



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