SGX Q1 profit up 25%, highest quarterly profit in over 10 years

Singapore

SINGAPORE Exchange (SGX) on Thursday reported a 25 per cent jump in its first quarter net profit to S$114.2 million, its highest quarterly net profit in more than a decade, driven by higher demand for its suite of investments and risk managements tools across its currency, commodity and equity asset classes.

Earnings before interest, tax, depreciation and amortisation (Ebitda) was S$156.4 million compared to S$121.6 million a year ago. Earnings per share rose 26 per cent to 10.7 Singapore cents, from 8.5 cents a year ago, sufficient for the board to declare an interim dividend of 7.5 cents a share, unchanged from a year ago. This is payable on Nov 11.

SGX CEO Loh Boon Chye said: "We had a strong start to FY2020, with robust performance across all key financial metrics and the highest quarterly net profit in more than 10 years."

This is SGX's first set of results following the July 1 re-organisation under three business units - fixed income, currencies and commodities (FICC); equities (cash and derivatives) as well as data, connectivity and indices.

Mr Loh said the growth across the three segments was largely due to broad-based efforts in expanding global client base and ensuring the exchange meets clients' risk management and capital efficiency needs.

"Since we embarked on our strategic priorities in FY2018, a quarter of our clients have increased the number of asset classes that they trade with SGX. Over the same period, we saw overnight trading grow from 10 per cent of our total derivatives volumes, to 18 per cent this quarter," he shared at a media and analysts briefing.

Total revenue for the three months ended Sept 30 rose 19 per cent to S$248 million from a year earlier.

FICC revenue - comprising revenues from fixed income and derivatives of currencies and commodities - rose 57 per cent to S$45.8 million versus S$29.1 million previously and accounted for 19 per cent instead of the previous 14 per cent, of total revenue.

Under that segment, fixed income revenue increased S$0.4 million or 16 per cent to S$3.2 million. There were 270 bond listings raising S$124.8 billion, compared to 247 listings raising S$91.8 billion a year earlier.

Its currency and commodity futures saw record trading volumes from higher participation from global financial institutions and customers trading a wider range of products across asset classes. Currencies and commodities-derivatives revenue rose 62 per cent to S$42.6 million. Trading and clearing revenue grew as commodities futures volumes increased, driven primarily by a doubling in the volumes in SGX's iron ore derivatives contracts to 5.9 million contracts. Currency futures volume was up 40 per cent at seven million contracts or US$383 billion, mainly from higher volumes in its CNH/USD and USD/INR contracts.

Equities revenue, comprising revenues from equities cash and equities derivatives - rose S$21.1 million or 14 per cent to S$176.1 million, accounting for 71 per cent of total revenue. There were two new equity listings which raised S$0.8 billion, compared to six which raised S$0.2 billion a year ago. Secondary equity funds raised stood at S$3.4 billion, up from S$1.1 billion a year ago. Clearing revenue grew as equity derivatives volume increased, mainly due to increased volumes in SGX's Nifty 50, Nikkei 225, and MSCI Singapore index futures contracts. Average fee per contract for equity, currency and commodity derivatives was higher at S$1.15 compared to S$1.05 previously, due to a change in mix of products traded and more higher-fee-paying customers.

Data, connectivity and indices revenue increased 4 per cent to S$25.7 million, accounting for 10 per cent of total revenue.

Mr Loh expects prolonged periods of low interest rates as central banks ease monetary policy in response to a slowing global economy.

He said: "In the coming months, we will continue to tap on our international network and partnerships to grow our customer base, widen our geographical reach by exploring new markets, and seek new investment opportunities to enhance our current capabilities."

SGX's FY2020 total expenses is projected to be between S$465 million and S$475 million, and technology-related capital expenditure to be between S$45 million and S$50 million.

SGX shares ended three cents, or 0.4 per cent, higher at S$8.28. The results were announced after market close.