It may be a dry season for initial public offerings (IPOs), but it has not stopped Singapore Exchange Limited (SGX: S68), or SGX, from reporting a strong set of earnings.
The bourse operator recently released its fiscal 2023 (FY2023) results for the period ending 30 June 2023.
The blue-chip multi-asset exchange post both top and bottom-line growth and rewarded shareholders by upping its annual dividend to S$0.34 per share.
Management sees commodities, foreign exchange, and equity derivatives as sustainable growth drivers for the medium term.
Here are five highlights from SGX’s FY2023 earnings report.
1. A strong and all-rounded set of financial numbers
FY2023 saw total operating revenue rise 8.7% year on year to S$1.2 billion.
The bulk of this increase came from SGX’s Fixed Income, Currencies and Commodities (FICC) division which enjoyed a 33.8% year-on-year jump in revenue to S$338.2 million.
The equities division saw revenue inching up 1.5% year on year to S$709.2 million while Data, Connectivity and Indices (DCI) division’s revenue slipped 0.3% year on year to S$147.1 million.
Operating profit climbed 9.7% year on year to S$589.5 million while net profit improved by 26.5% year on year to S$570.9 million.
SGX’s net profit was, however, boosted by several one-off, exceptional gains and losses.
After adjusting for these, core net profit rose 10.3% year on year to S$503.2 million.
Despite the rise in net profit, SGX’s free cash flow declined by 27.3% year on year to S$392.4 million due to lower operating cash flow generated.
In line with the good results, the group has upped its quarterly dividend from S$0.08 to S$0.085, taking the annualised full-year dividend to S$0.34.
2. A surge in volumes for the FICC division
The FICC division’s revenue made up around 28.3% of SGX’s total revenue and can be broken down into Fixed Income, and Currencies and Commodities.
Fixed Income revenue declined by 31.8% year on year to S$8.3 million with fewer bond listings in FY2023 (918) compared with FY2022 (1,179).
On the other hand, Currencies and Commodities is the star performer with a 37.1% year-on-year surge in revenue to S$329.9 million.
SGX witnessed increased trading volumes in iron ore and rubber derivatives, where volumes rose 40.8% and 23.1% year-on-year, respectively, to 36 million and 2.1 million contracts.
Currency derivatives also enjoyed a 28.7% year-on-year jump in trading volumes to hit 36.7 million contracts.
3. Weak cash equities market
On the flip side, the equities market remained weak with lower securities daily average volume (SDAV) amid a decline in total market capitalisation.
Listing revenue fell by 11% year on year to S$30.9 million as there were just eight new IPOs in FY2023 compared with 17 in the previous fiscal year.
The total traded volume fell by 9.8% year on year to 350.3 billion while the total traded value slid 14.1% year on year to S$275.5 billion.
Total market capitalisation slipped by 6.2% year on year to S$811.7 billion.
SDAV declined from S$1.27 billion in FY2022 to S$1.1 billion in FY2023.
4. Higher average fee per contract offset by lower equity derivative volumes
SGX’s equity derivatives saw a mixed performance.
Volumes were 8.6% lower year on year, falling to 172.7 million contracts.
The top contributor was the FTSE China A50 Index Futures which made up close to 54% of the total traded volume.
There was an 11% year-on-year fall in traded volume for the A50 Futures along with a 3.9% year-on-year dip in Nifty 50 Index futures and options.
The lower volume was offset by a higher average fee per contract of S$1.61 as there was an increase in the proportion of higher fee-paying customers for both securities mentioned above.
5. Commodities and currencies to power growth
Looking ahead, management expects iron ore and foreign exchange (FX) to represent two pillars of growth for the bourse operator.
The commodities daily average volume (DAV) climbed 35% year on year to 160,000 contracts in FY2023, with iron ore leading the way at 140,000 contracts, up sharply from just 81,000 contracts back in FY2021.
It was another record year for iron ore as SGX expanded its client base with more financial clients.
Over at SGX’s FX franchise, there was a 28.7% year-on-year growth in currency futures volume, with CNH and INR contracts among the top 10 traded listed FX futures globally.
For the over-the-counter (OTC) FX franchise, it recorded an average daily volume (ADV) of US$75.8 billion, putting it on track hit the US$100 billion milestone by FY2025.
Get Smart: Targeting steady long-term growth
SGX has been successful in morphing into an Asian multi-asset hub.
The group is building a fully integrated and scalable FX platform to attract more clients and act as a one-stop shop for international FX futures and OTC participants.
Management is targeting high single-digit year on year percentage growth in revenue in the medium term.
In line with this projected increase, SGX plans to increase its dividend per share by a mid-single-digit percentage in the long run.
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Disclosure: Royston Yang owns shares of Singapore Exchange Limited.