Results Analysis: 1HFY22 performance in line with estimates
1HFY22 adjusted net profit declined 3% y-o-y to S$222m. Revenue growth was flattish at S$522m while total expenses increased 6% y-o-y to S$262m on higher staff and technology costs. Two quarterly dividends of 8.0 cents per share was announced, bringing total dividends in 1HFY22 to 16.0 cents per share; there are currently no plans to introduce scrip dividends in FY22 but SGX will review on periodic basis. SGX has debt headroom of up to 2x EBITDA, currently at 1.4x; it generates sufficient operating cashflow to more than offset dividends and capital expenditure.
Mixed performance across asset classes. Cash equities trading and clearing revenue declined 10% y-o-y to S$101m as total traded value dropped 7% y-o-y with lower average clearing fees of 2.60bps. Currencies and commodities derivatives trading revenues improved 16% y-o-y to S$107m on higher transaction volumes while equities derivatives trading revenue increased 19% y-o-y to S$131m due to higher average fees from FTSE China A50, Nifty 50 and FTSE Taiwan Index futures, but partially offset by 68% y-o-y decrease in treasury income to S$13m on lower interest rates. Treasury income should reprice with a lag, could take another few months before a material uptick. DCI revenues improved 3% y-o-y to S$73m due to higher revenue from Scientific Beta and an increase in data subscription.
Integrated FX platform. SGX completed the acquisition of MaxxTrader in January 2022 and the FX Electronic Communication Network (ECN) went live in November 2021. Total FX average daily volume, comprising both on-exchange futures and OTC, increased 46% to US$57bn (excluding DAV of MaxxTrader and ECN). SGX expects MaxxTrader to add another 20-25% to total volumes to c.US$70bn. Positive impacts include 1) accelerate launch of ECN with MaxxTrader technology; 2) provide full suite of OTC FX solutions to both buy-side and sell-side clients and 3) beyond OTC FX, MaxxTrader also has technology capabilities around futures.
Listings and products. Inaugural batch of three SPACs listings in January 2022 raised >S$500m; fees range from S$100-200k, similar to IPOs. There were also 5 new ETFs listed in 1HFY2022; combined AUM for ETFs listed on SGX grew almost 50% to >S$12bn in the last year.
Maintain HOLD and unrevised TP of S$10.20.
Interim Income Statement (S$m)
FY Jun | 1H2021 | 1H2022 | +/- y-o-y |
Revenue | 521 | 522 | 0% |
Cost of Goods Sold | (248) | (262) | 6% |
Gross Profit | 273 | 260 | -5% |
Other Oper. (Exp)/Inc | 0.0 | 0.0 | |
Operating Profit | 273 | 260 | -5% |
Other Non Opg (Exp)/Inc | 15.6 | 9.6 | -38% |
Associates & JV Inc | (0.6) | (6.0) | +950% |
Pre-tax Profit | 288 | 263 | -9% |
Tax | (47.7) | (44.2) | -7% |
Net Profit | 240 | 219 | -9% |
Net profit bef Except. | 228 | 222 | -3% |
EBITDA | 321 | 310 | -4% |
Margins | |||
Opg Profit Margins (%) | 52.3 | 49.8 | |
Net Profit Margins (%) | 46.1 | 42.0 | |
Daily average | |||
Sec ave daily trading volume (bn) | 1,745 | 1,562 | -10% |
Sec ave daily trading value ($bn) | 1,264 | 1,166 | -8% |
Derivatives ave daily trading volume (m) | 0.932 | 0.927 | -0.5% |
Velocity | 49% | 39% | -20% |
Open interest (m) | 4.344 | 4,467 | +3% |
Source: Company, DBS Bank