SINGAPORE EXCHANGE LIMITED
S68.SI
Singapore Exchange Limited - Resumption of a strong quarter despite market uncertainty
Highlights
- SGX 3QFY06/16 PATMI of S$89m was in line with our expectation of S$86mn
- Securities and derivatives market resumed a strong quarter after a weak 2QFY06/16 caused by heightened uncertainty and volatility
- As expected, interim dividend of 5 cents per share proposed, 1 cent higher from prior year
- Maintain “Accumulate” with higher TP of S$8.62 (S$8.28 previously)
How do we view this?
Securities business remains steady.
- Securities revenue grew 4% yoy with SDAV improving by 5% yoy.
- SGX announced in late-March that its first Hong Kong (Quam Securities) and Taiwan (Global Link) member brokers can begin to trade SGX-listed securities.
- We believe this could benefit its securities business.
Derivatives volume regained most of the lost ground in 2QFY06/16.
- Revenue grew 3% yoy, however average yield per contract was lower at S$1.15 (3Q15: S$1.39) because of revision of pricing and incentives for iron ore contracts as a result of increased competition.
- Total volumes increased 24% yoy to 48.7mn contracts, contributed by China A50 Index Futures, Nikkei 225 Index Futures and iron ore contracts.
- We expect stronger performance ahead as additional Derivatives Trading Members (joined in March-16) should help expand the sales channels for Equity Index Futures and Iron Ore futures. They are Hong Kong-based Wing Fung Futures Limited and ZZFS International (H.K.) Limited and Taiwan-based JihSun Futures Co.,Ltd. ZZFS International is a subsidiary of CITIC Futures Co.,Ltd., China’s largest futures brokerage firm.
Vertical Integration and Multi Asset Strategy.
- SGX continues to build capabilities that would enhance customer stickiness.
- Through infrastructure capabilities such as colocation services and a wide variety of derivatives and securities offered, SGX would be seen as a one stop shop for market participants.
- And by building these capabilities early, SGX should be more prepared to meet stiffer competition.
Investment Actions
- We have raised our FY06/15 and FY06/16 net profit estimates by 4 and 10%, respectively to factor in higher SDAV and increased pace of DDAV growth.
- Maintain “Accumulate” with higher TP of S$8.62.
Jeremy Teong
Phillip Securities
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http://www.poems.com.sg/
2016-04-21
Phillip Securities
SGX Stock
Analyst Report
8.62
Up
8.28
