SGX H1 net profit up 12.4% on higher revenue

Singapore

THE Singapore Exchange (SGX) on Friday posted a net profit of S$239.8 million for the half year ended Dec 31, 2020, up 12.4 per cent from S$213.3 million a year ago.

This came mainly from revenue increases across all three of its businesses: equities; fixed income, currencies and commodities; and data, connectivity and indices, it said in a regulatory filing.

Earnings per share stood at 22.4 Singapore cents for the half year, up from 19.9 cents a year ago.

Adjusted net profit, which exclues certain items that have less bearing on operating performance, was up 6.6 per cent at S$228 million.

An interim quarterly dividend of eight Singapore cents per share has been declared, up from 7.5 cents the previous year. The dividend will be paid on Feb 8. This brings total dividends for the half year to 16 Singapore cents per share, versus 15 cents in the previous year.

"We recorded a solid performance in the first half of FY21," said chief executive officer Loh Boon Chye at a results briefing on Friday.

Revenue for H1 rose 8.8 per cent to S$520.8 million from S$478.5 million in the year-ago period.

Equities, which make up 67 per cent of total revenue, edged up 2.8 per cent to S$350.8 million.

Equity derivatives volumes rose by 4 per cent to 93.3 million contracts, but trading and clearing revenue for derivatives declined 5 per cent to S$110.6 million, mainly due to a change in mix of products and introductory fees for the new FTSE products suite.

"We deepened our partnership with FTSE Russell with a long-term strategic partnership agreement across asset classes," Mr Loh said, adding that the partnership had "early success" as it switched liquidity to the FTSE Taiwan futures contract, with aggregate volume of SGX's major Taiwan contacts increasing 9 per cent year-on-year.

The introductory fees had an impact on average derivative clearing fee per contract, but Mr Loh said: "We expect our average fee per contract to improve as our FTSE Taiwan and new contracts run in over the next two quarters."

Revenue from the fixed income, currencies and commodities segment rose 17.1 per cent to S$99.2 million, and accounted for 19 per cent of total revenue. The segment was boosted by revenue contribution from BidFX, a cloud-based FX trading platform. SGX had purchased the remaining 80 per cent stake of BidFX, which it did not own in its fiscal first half.

On the data, connectivity and indices front, revenue was up 35.1 per cent to S$70.7 million and accounted for 14 per cent of total revenue. Under the segment, market data and indices revenue grew to S$39.6 million, from S$21.4 million, mainly due to consolidation of revenue from Scientific Beta, a smart beta index firm, which was acquired earlier last year.

SGX said recent acquisitions Scientific Beta and BidFX contributed to 6 per cent of total revenues. Mr Loh said SGX expects the medium-term revenue contribution from the subsidiaries to grow beyond this, as they "tap on an enlarged network of resources within the SGX group to execute on their growth plans".

In terms of outlook, Mr Loh noted that global economies are expected to be on track for recovery with the increase distribution and accessibility of Covid-19 vaccines. "We therefore anticipate continued growth in investments into cash equities, together with a potential increase in portfolio risk management activities, due to a shift in US policies under a new administration."

Maybank Kim Eng analyst Thilan Wickramasinghe said: "I think it shows the platform is pretty resilient, even with the MSCI contracts migrating away, they have managed to contain that, so that's again a positive."

"The main thing we were concerned about is how volumes are going to sustain, and I think that side has come through," he said, adding it was also positive that recent acquisition have also started to contribute in a noticeable way.

SGX is looking to continue to drive growth through strategic partnerships, client acquisitions and new product offerings.

Mr Loh noted that SGX has launched more than 20 equity derivative contracts in the first half of FY21, and the exchange will be launching four ESG-focused futures contracts on Monday in partnership with FTSE Russell.

SGX separately announced on Friday that it has entered into a joint venture (JV) with Temasek to advance digital asset infrastructure in capital markets.

The JV is set to be Asia-Pacific's first exchange-led digital asset venture focused on capital markets workflows through smart contracts, ledger and tokenisation technologies.

Shares of SGX ended at S$10.09 on Friday, down S$0.15 or 1.5 per cent, before the financial results announcement.

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