Singapore Exchange Reports Higher Adjusted Net Profit, Ups Dividend: 5 Highlights from the Bourse Operator’s Latest Earnings

Next in line to release its earnings is Singapore Exchange Limited (SGX: S68), or SGX.

The bourse operator presented its fiscal 2024’s first half (1H FY2024) earnings ending 31 December 2023.

The blue-chip group reported a respectable set of numbers despite facing headwinds at its equities division.

Here are five salient points from the stock exchange operator’s latest financial results.

1. A resilient set of financial numbers

SGX delivered a resilient set of financials despite the weaker macroeconomic backdrop which led to more cautious sentiment.

Revenue rose 3.6% year on year to S$592.2 million for 1H FY2024.

Operating profit improved by 4.3% year on year to S$296.1 million as total expenses rose 3% year on year.

Net profit, however, dipped by 1% year on year to S$281.6 million because of one-off non-operating items.

Excluding these, net profit would have risen by 6.2% year on year to S$251.4 million.

SGX increased its interim dividend by S$0.005 to S$0.085, in line with its FY2023 results.

Free cash flow for 1H FY2024 surged by 41.1% year on year to S$230.2 million.

2. Higher derivatives volumes and revenue

The group enjoyed higher derivatives volumes across currencies and commodities.

Its FICC (fixed income, currencies and commodities) division saw revenue jump 28.1% year on year to S$151.9 million which took up slightly more than a quarter of total group revenue.

In particular, currencies and commodities revenue climbed 29.5% year on year to S$148 million, with currency derivatives volume increasing nearly 24% year on year to 23 million contracts.

Iron ore derivatives volume did even better, rising by 48.7% year on year to 25.4 million contracts.

Total currencies and commodities volume improved by 35.7% year on year to 52 million contracts.

3. Lower cash equities and equity derivatives volume

On the flip side, SGX saw its cash equities and equity derivatives sub-divisions register a weaker performance due to market uncertainty and volatility.

Cash equities revenue dipped by 5.6% year on year to S$159.6 million and made up 27% of total group revenue.

Only four new equity listings were executed, raising S$19 million, while secondary equity funds raised just S$600 million.

The total traded value for the equities market fell 12.2% year on year to S$121 billion, with SGX’s total market capitalisation declining by 3.3% year on year to S$802 billion.

Total traded volume dipped by 5.6% year on year to 158.1 billion.

Over at equity derivatives, revenue declined by 7% year on year to S$160.7 million, making up 27.1% of total group revenue.

The sub-division’s weaker performance was led by a 9.3% year-on-year decline in FTSE China A50 index futures volume to 44.4 million contracts.

Nifty 50 index futures and options also saw volume plunging 38.8% year on year to 8.8 million contracts but this was offset by a 3.2% year-on-year increase in FTSE Taiwan index futures to 8.7 million contracts.

Total cash derivatives volume declined by 14% year on year to 77.7 million contracts.

The average fee per contract also decreased slightly from S$1.58 in 1H FY2023 to S$1.54 in the current period.

4. Commodities and FX volumes stay robust

SGX’s over-the-counter (OTC) foreign exchange (FX) platform is now a growing contributor to its bottom line.

The platform saw a 24% year-on-year growth in FX futures volume and is the world’s most liquid Asian FX futures exchange.

SGX has become the dominant venue for the trading of international RMB futures, with open interest in USD/CNH futures up 29% to more than 120,000 contracts.

For the OTC FX average daily volume (ADV), it is on track to reach US$100 billion by FY2025 or earlier.

SGX intends to expand its suite of futures products to include interest rate derivatives to better help its customers manage their portfolios.

The commodities franchise is also seeing healthy growth with a 48% increase in commodities volume.

Daily average volume (DAV) for 1H FY2024 hit 197,000 lots, up from 131,000 in 1H FY2023 and more than double the 89,000 lots in 1H FY2022.

5. Expanding its product suite

As SGX pivots to become a multi-asset exchange, it has continued to increase its slate of products.

The bourse operator was the first in Asia to launch listed structured certificates and has enlarged its exchange-traded funds (ETFs) shelf with the launch of a landmark climate action ETF with BlackRock (NYSE: BLK).

The group also launched its first pair of ETFs under a link with the Shanghai Stock Exchange (SSE).

Its collaboration with the Stock Exchange of Thailand (SET) to launch Singapore depository receipts (DRs) is seeing a healthy pipeline of such DRs on both sides.

Get Smart: Resilience amid adversity

SGX plans to continue expanding its offering of products while fostering deeper relationships with its partners such as SSE and SET.

The group has maintained a single-digit compound annual growth rate for dividends in the medium term, subject to earnings growth.

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Disclosure: Royston Yang owns shares of Singapore Exchange Limited.

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