SGX - OCBC Investment 2018-07-30: 30 Cents Is No Loose Change!

SGX - OCBC Investment Research 2018-07-30: 30 Cents Is No Loose Change! SINGAPORE EXCHANGE LIMITED SGX:S68

SGX - 30 Cents Is No Loose Change!

  • FY18 DPS of 30 cents.
  • From FY19, 7.5 cents per quarter.
  • Fair value raised to S$8.32.

4Q came in below expectations

  • Singapore Exchange (SGX) posted full year net earnings of S$363.2m, up 6.9% y-o-y, but below market and our expectations. Based on Bloomberg, consensus was expecting FY18 earnings of S$372m. 4Q18 earnings came in at S$83.7m, down 1.8%. 
  • Equities and Fixed Income accounted for 48.1% of FY18 revenue, while Derivatives accounted for 40.2% of revenue (versus 37.8% the previous year).
  • Operating expenses of S$419.8m came in on the higher end of its guidance of S$410-420m. For FY19, management is guiding for operating expenses of S$445m-$455m with the same technology-related expenses of S$60m-$65m.

Dividend: 7.5cents per quarter or 30 cents per year

  • Management has proposed a final dividend of 15 cents, bringing the full year payout to 30 cents (versus 28 cents previously) – the highest in its history. This will be payable on 5 Oct 2018.
  • Management also announced a change in its dividend policy based on absolute amount rather than as a percentage of net profit to ensure a consistent payout throughout the year and shareholders will receive dividends earlier in the year. From FY19 onwards, SGX will pay a quarterly dividend of 7.5 cents per quarter (5 cents previously) or a total of 30 cents per year.

~ ~ Where SG investors share

Resuming discussion with NSE

  • Since our last report on 1 June 2018 (please refer to the report titled “Singapore Exchange Limited - No longer nifty, but still stable”) where we highlighted that the selling was overdone, the stock has moved up from S$7.24 to the current price of S$7.57, up some 4.6% despite trade tension and property cooling measures in Singapore. In the latest update on the SGX-NSE (National Stock Exchange of India) front, both exchanges have resumed discussions on a potential collaboration in GIFT city. The latter is India’s identified centre for International Finance Services.
  • ~ Where SG investors share
  • At current SGX share price, dividend yield is 4% from a debt-free company.
  • Rolling into FY19/20 forecasts and based on the same valuation of 23x earnings, our fair value estimate moves up from S$7.89 to S$8.32.

Carmen Lee OCBC Investment Research | 2018-07-30
SGX Stock Analyst Report BUY Maintain BUY 8.32 Up 7.890