Summary: Singapore Exchange (SGX) posted 2QFY13 net earnings of S$76.3m, up 16.7% YoY, supported by better securities and derivatives income. For the Securities business, daily average traded value rose 8% YoY to S$1.2b. For the Derivatives business, daily average volume hit a record of 358,532 contracts, up 30% YoY. Its clearing house, the Singapore Exchange Derivatives Clearing (SGX-DC), has become a qualifying Central Counterparties (CCP) since 14 Jan 2013. The positive momentum in early 3QFY13 means that 2HFY13 is likely to be better than 1HFY13, and we raised our full year net earnings to S$317m. SGX’s share price has done well since our last report, up 10%, but we see limited upside from current level. As such, we advocate locking in some profits and re-entering at lower price levels. Maintain HOLD with fair value estimate of S$6.80.
Increase in daily traded value and volume
Singapore Exchange (SGX) delivered 2QFY13 net earnings of S$76.3m, up 16.7% YoY, and slightly above consensus estimate of S$74.8m. Growth came from better securities and derivatives income. For the Securities business, daily average traded value rose 8% YoY to S$1.2b. For the Derivatives business, daily average volume hit a record of 358,532 contracts, up 30% YoY and 17% QoQ. Other key highlights of the quarter included strong showing from both the IPO and bond market. The former saw a 3.7-fold YoY increase in capital raised to S$799m for the quarter, while the latter enjoyed a more than doubling in funds raised to S$39.7b. Management has declared an interim dividend of 4 cents which is payable on 6 Feb 2013.
Updates and guidance
Management also updated that its clearing house, the Singapore Exchange Derivatives Clearing (SGX-DC), has become a qualifying Central Counterparties (CCP) since 14 Jan 2013. As part of the new Basel III framework, banks clearing through a Qualifying CCP will benefit from lower capital requirements, and SGX’s CDP and SGX-DC members can benefit from lower capital requirements. In addition, management also guided that expenses for FY13 are likely to be between S$295m and S$305m. Capital expenditure is expected to be S$30-35m, same as guided last quarter.
Maintain HOLD; but lack of price drivers for now
While the year has started off on a positive note, and looks set to be a good year for equities based on fund flow and polls, we believe that global headwinds remain. The positive momentum in early 3QFY13 means that 2HFY13 is likely to be better than 1HFY13, and we have adjusted our forecasts with full year net earnings of S$317m (from S$308m). SGX’s share price has done well since our last report, up 10%, largely due to increase in equity activities, but we see limited upside from current level. As such, it is good to lock in some profits and re-enter at lower price levels. Maintain HOLD with fair value estimate of S$6.80.
Singapore Exchange (SGX) delivered 2QFY13 net earnings of S$76.3m, up 16.7% YoY, and slightly above consensus estimate of S$74.8m. Growth came from better securities and derivatives income. For the Securities business, daily average traded value rose 8% YoY to S$1.2b. For the Derivatives business, daily average volume hit a record of 358,532 contracts, up 30% YoY and 17% QoQ. Other key highlights of the quarter included strong showing from both the IPO and bond market. The former saw a 3.7-fold YoY increase in capital raised to S$799m for the quarter, while the latter enjoyed a more than doubling in funds raised to S$39.7b. Management has declared an interim dividend of 4 cents which is payable on 6 Feb 2013.
Updates and guidance
Management also updated that its clearing house, the Singapore Exchange Derivatives Clearing (SGX-DC), has become a qualifying Central Counterparties (CCP) since 14 Jan 2013. As part of the new Basel III framework, banks clearing through a Qualifying CCP will benefit from lower capital requirements, and SGX’s CDP and SGX-DC members can benefit from lower capital requirements. In addition, management also guided that expenses for FY13 are likely to be between S$295m and S$305m. Capital expenditure is expected to be S$30-35m, same as guided last quarter.
Maintain HOLD; but lack of price drivers for now
While the year has started off on a positive note, and looks set to be a good year for equities based on fund flow and polls, we believe that global headwinds remain. The positive momentum in early 3QFY13 means that 2HFY13 is likely to be better than 1HFY13, and we have adjusted our forecasts with full year net earnings of S$317m (from S$308m). SGX’s share price has done well since our last report, up 10%, largely due to increase in equity activities, but we see limited upside from current level. As such, it is good to lock in some profits and re-enter at lower price levels. Maintain HOLD with fair value estimate of S$6.80.
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