With a potential economic slowdown looming, investors are looking for investments that provide stability and certainty.
Singapore Exchange Limited (SGX: S68), or SGX, is in a good position to withstand any oncoming economic headwinds.
The bourse operator enjoys a natural monopoly and has also paid out a consistent dividend since 2001.
The blue-chip multi-asset exchange operator recently released its earnings for the fiscal full year 2022 (FY2022) ended 30 June 2022.
Not only did SGX report a new revenue record, it also expressed confidence that its fixed income, currencies and commodities division will be a key growth driver for FY2023.
Here are five highlights from the bourse operator’s latest full-year earnings.
1. Revenue at a record-high
SGX reported operating revenue of S$1.1 billion, up 4.1% year on year from S$1.06 billion.
This is the bourse operator’s highest-ever revenue since its listing.
However, operating expenses increased by 7.9% year on year, resulting in operating profit inching up just 1.3% year on year to S$537.4 million.
Subsequently, net profit came in 1.3% higher year on year at S$451.4 million.
To be sure, the group generated a healthy free cash flow of S$539.4 million, 6.2% higher than the S$507.7 million generated a year ago.
2. Higher overall volume for currencies and commodities
SGX’s fixed income, currencies and commodities (FICC) division saw revenue jump by 19% year on year to S$252.7 million and this division accounted for slightly more than one-fifth of total group revenue.
On the fixed income side, the bourse operator saw 1,179 bond listings that raised S$429.6 billion, up from 795 bond listings a year ago that raised S$389.1 billion.
Currencies and commodities revenue climbed 22% year on year to S$240.6 million with higher volumes recorded for a range of derivative products.
Total commodity derivatives saw volumes increase by 21% year on year to 30.3 million contracts while currency derivative volume rose 10% year on year to 28.5 million.
Over-the-counter (OTC) foreign exchange saw a higher contribution due to SGX’s acquisition of MaxxTrader in January this year.
3. A mixed showing for SGX’s equities division
While FICC performed well, it was a mixed showing over at SGX’s Equities division, which accounted for around two-thirds of group revenue.
Revenue for the segment dipped slightly from S$701.1 million a year ago to S$698.9 million in FY2022 due to lower traded volume and value and a dip in the overall average clearing fee.
Total traded volume fell 22% year on year to 388 billion while traded value slipped 6% year on year to S$320.8 billion.
The average clearing fee fell by 5% year on year to 2.56 basis points from higher participation from market makers and a change in product mix.
On the bright side, the division recorded 17 new equity listings that raised S$1.9 billion for FY2022, almost twice the amount raised from just 11 listings in FY2021.
4. Growing its OTC business and inking global partnerships
SGX has grown its OTC foreign exchange business to contribute 5% to total group revenue.
Average daily volume has grown 64% year on year to US$70.6 billion and remains on track to hit the US$100 billion mark soon.
The group has collaborated with international stock exchanges to improve connectivity and increase the breadth of its product offerings.
A securities market data distribution agreement has been inked with the Shanghai Stock Exchange, while an ETF product link is in development with the Shenzhen Stock Exchange.
Also in Asia, the National Stock Exchange of India (NSE) IFSC-SGX Connect has just been launched which will enhance liquidity for both exchanges.
Further afoot, SGX has cemented a partnership with both NASDAQ Inc (NASDAQ: NDAQ) and the New York Stock Exchange for potential secondary listings on both bourses.
5. A decent dividend yield with the potential for growth
A final quarterly dividend of S$0.08 was declared, bringing the FY2022 dividend to S$0.32 per share.
At a share price of S$10.01, SGX’s shares offer a trailing dividend yield of 3.2%.
For context, adjusted earnings per share and operating cash flow per share stood at S$0.427 and S$0.546 for FY2022, respectively.
With both metrics higher than SGX’s current dividend payout, there is scope for the group to raise dividends in the future.
Get Smart: A new chairman appointed
Investors can look forward to better days ahead as these collaborations promise to increase trading volume and drum up interest in SGX’s expanding suite of products.
Meanwhile, SGX has announced that Mr Koh Boon Hwee has been appointed as the group’s new chairman for FY2023 and will take over from current chairman Kwa Chong Seng from 1 January next year.
Mr Koh brings a wealth of experience to the SGX Group as he was the former chairman of DBS Group (SGX: D05), Singtel (SGX: Z74) and Singapore Airlines Limited (SGX: C6L).
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Disclaimer: Royston Yang owns shares of Singapore Exchange Limited and DBS Group.