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Singapore Exchange Q4 profit up 24% on record derivatives revenue

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The Singapore Exchange (SGX) has posted a net profit of S$103.9 million in the fourth quarter, up 24.1 per cent from the same period a year earlier.
SGX

Singapore

THE Singapore Exchange (SGX) has posted a net profit of S$103.9 million in the fourth quarter, up 24.1 per cent from the same period a year earlier.

Revenue in the three months ended June 30 rose 16.5 per cent to S$248 million, led by record derivatives revenue of S$130.1 million, up 52.2 per cent from the same period a year earlier.

Equities and fixed income revenue fell 9.4 per cent to S$92 million.

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Securities daily average traded value (SDAV) declined 14 per cent to S$1.01 billion from the same quarter a year earlier.

Fourth-quarter earnings per share was 9.7 Singapore cents, up from 7.8 cents in the same period a year earlier.

A final dividend of 7.5 Singapore cents per share was proposed, bringing the total dividend for the year to 30 cents per share, unchanged from a year earlier.

For the full-year ended June 30, net profit rose 8 per cent to hit an 11-year high of S$391.1 million, above consensus estimates of S$381 million.

Full-year revenue also beat analyst estimates, rising 8 per cent to S$910 million.

Derivatives revenue jumped 35.3 per cent to a record high of S$460 million, led by increased volumes in SGX FTSE China A50, MSCI Taiwan, and iron ore derivatives contracts.

At a results briefing on Wednesday, chief executive Loh Boon Chye called 2019 "a year of records" for SGX.

"The results validate our position as an international multi-asset exchange providing a single point of access into Asia," he said.

Derivatives now account for 51 per cent of group revenue, up from 40 per cent in the 2018 financial year.

"Our full year T+1 volume, the so-called overnight session, was up 38 per cent year on year and is now contributing 14 per cent of our total derivatives volumes. It reflects increased trading interest from international participants in the non-Asian hours," Mr Loh added.

Equities and fixed income revenue fell 14.5 per cent to S$348 million, which represents 38 per cent of group revenue, down from 48 per cent in 2018.

Although SDAV in the 12 months ended June 30 declined 17 per cent to S$1.04 billion from S$1.26 billion in the same period a year earlier, the lower trading activity was in line with regional markets, said Mr Loh.

He noted that cash was the best performing asset class in 2018 as investors adopted a more cautious stance, but trading activity has been improving in the last six months.

Mr Loh also fielded questions on his outlook for the SGX FTSE China A50 Index futures contracts, which account for 44 per cent of SGX's derivatives volumes.

China A50 contract volumes grew 41 per cent over the year, but analysts are concerned that SGX will lose market share once the Hong Kong Exchange launches MSCI China A Index futures later this year.

Mr Loh said: "We're not cautious on the outlook. Obviously, there are commentaries on global growth slowing... but relative to that, Asia will lead growth better than the rest of the developed markets... China is opening up with greater index inclusion. The market will only get bigger.

"More importantly, besides the A50, our Net Total Return product suite has also reached record volumes and that brings with it very sticky open interest, on the back of a trend of passive investing," he said.

"We will continue to look at bolt-on acquisitions that can supplement our FICC (fixed income, currencies and commodities) pillar, and also our DCI (data, connectivity and indices) pillar."

Net asset value per share was S$1.02 as at June 30, flat from a year earlier. SGX shares fell three cents or 0.38 per cent to S$7.92 before the results were announced.