Recently, we featured Singapore’s only stock market operator, Singapore Exchange Limited (SGX: S68) (SGX), as one of four dividend-paying stocks to consider for your portfolio.
On 9 February 2023, SGX released its earnings for the first half of the financial year ending 30 June 2023 (FY2023). If you are one of SGX’s followers, you might be interested in the company’s latest results.
With that, let’s look at three main aspects of SGX’s financial results announcement in this article.
#1 1H FY2023 Revenue Increased By 10%
SGX has three business segments — Fixed Income, Currencies and Commodities (FICC); Equities; and Data, Connectivity and Indices (DCI). Overall, the company’s revenue went up 10% year-on-year to S$571 million.
Both FICC and Equities saw increases in revenue, but DCI saw a slight dip in its top-line.
FICC revenue rose 35% year-on-year to S$154.3 million, accounting for 27% of total revenue; equities revenue grew 3% to S$344.7 million, contributing to 60% of overall revenue; while DCI revenue fell 1% to S$72.5 million, accounting for 13% of total revenue.
Source: Singapore Exchange 1H FY2023 earnings presentation
Let’s now focus on the Equities (Cash) portion of SGX’s business, which is something retail stock investors would be familiar with.
This sub-segment of SGX’s Equities business saw its revenue fall 10% (or around S$20 million) to S$171.2 million as a drop in securities daily turnover value (SDAV) and average clearing fee hit the top-line. A lower number and value of new equity listings for the latest period also affected the business.
For the latest period, there were four new equity listings that raised SS$9.7 million, compared to six new listings last year raising S$1.3 billion. Also, S$2.4 billion was raised from secondary equity funds in 1H FY2023, down from S$4.4 billion a year back.
Moving on, SGX’s operating expenses increased by 10.1% to S$237.4 million mainly from higher staff costs, technology expenses and royalties. Consequently, operating profit rose 9.5% to S$284.1 million. Operating profit margin was stable at 50%.
With non-operating income growing significantly for 1H FY2023 to S$61.2 million (up from S$9.6 million exactly a year ago) mainly due to an increase in one-off other income including interest income, SGX’s net profit surged 30% to S$284.6 million.
Loh Boon Chye, SGX’s chief executive, summarised his company’s latest results in the earnings release, saying:
“We are pleased to deliver a set of financial results that underscores SGX Group’s relevance to global investors. Our derivatives business has continued to outperform with a 28% year-on-year increase in revenue, driven by broad-based gains across asset classes and record volumes in key contracts. Notably for Commodities, we accelerated the financialisation of iron ore and expanded our service offering.”
#2 Fall In Operating Cash Flow, Despite Higher Profitability
As of 31 December 2022, SGX had S$920.4 million in cash on the balance sheet with S$677.4 million in debt. With a strong net cash position, the stock exchange should be able to tide through any tough economic conditions.
Due to the one-off gains as mentioned earlier, which are mostly non-cash in nature, it would be worthwhile to focus on SGX’s cash flow from operations. For the latest half-year period, SGX’s operating cash flow tumbled 28.8% to S$182.0 million.
However, the group maintained its 1H FY2023 dividend at 16.0 Singapore cents per share.
Source: Singapore Exchange 1H FY2023 earnings presentation
#3 What Does The Future Hold For SGX?
Looking ahead, SGX mentioned:
“In the coming months, we will commence the full-scale operations of the National Stock Exchange of India (NSE) IFSCSGX Connect, which will bring us closer to combining the growing domestic and international liquidity pools for Nifty products. The re-opening of China’s borders could lead to higher portfolio risk management and access activities on our derivatives platform. For cash equities, near-term uncertainties may persist as inflation and interest rate risks may impact growth and corporate earnings.”
It will be interesting to watch how much of China’s re-opening opportunity SGX manage to capture in the quarters ahead.
SGX shares ended Friday at S$9.19 each, translating to a price-to-earnings ratio of 19.6x and a dividend yield of 3.5%.
The post 3 Things To Know About SGX 1H2023 Financial Results appeared first on DollarsAndSense.sg.
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