<Results first take> HKEx (388 HK) – FY23 earnings in-line with market expectation
- FY23 net profit rose 18% to HK$11.9bn, broadly in-line with market expectation
- Revenue was up 11% y-o-y to HK$20.6bn, thanks to increase in net investment income from Margin Funds and Corporate Funds, offset by lower Headline ADT
- EBITDA margin showed slight improvement of 1ppt to 73%
- Expect ADT of HK stock market to remain low in near-term. Our recommendation and TP are currently under review
What’s new
FY23 results broadly in-line with market expectation. HKEx recorded net profit of HK$11.9bn in FY23, increased 18% y-o-y, in-line with market expectation. This was mainly driven by turnaround in net investment income from Corporate Funds from -HK$48m in FY22 to HK$1.5bn in FY23, with net fair value gain on External Portfolio and higher investment income from internally managed Corporate Funds. Revenue rose 11% y-o-y to HK$20.6bn, thanks to record high net investment income recorded from Margin Funds, offset by a 16% y-o-y decline in Headline ADT to HK$105bn. EBITDA margin was at 73%, similar to FY22. HKEx announced second interim dividend per share of HK$3.91 (FY23: HK$8.81 ps), with 90% payout ratio (same as previous years).
Investors sentiment remains subdued. YTD average daily turnover stood at HK$92.6bn in 2024, marking a decline of c.28% from the same period last year. ADT was even lower in Feb at HK$85.6bn as market awaits strong stimulus policy from the Chinese Government. In near term, the investors’ risk appetite is anticipated to remain low, given the expectation for first interest rate cut in May has drastically dropped from 100%+ at the end of Dec to 17.4% now. As of Feb, a total of USD25bn fund outflow was recorded from active foreign domicile funds since 2H23. Investors sentiment will take time to improve as we expect China’s economic stimulus will remain reactive. These remain the key concerns moving forward, despite various measures mentioned in the HK budget to boost market efficiency and liquidity. We believe Hong Kong stock market is lacking near-term catalyst for a sustainable rebound. We will provide more details following today’s earnings conference call at 5:30PM. We are currently reviewing our recommendation and TP.