With the earnings season in full swing, many REITs have already reported their latest financial numbers.
All eyes will be on the blue-chip stocks as they are the next in line to announce their earnings.
Last week, Keppel Corporation Limited (SGX: BN4) reported a creditable financial performance despite tough economic conditions.
This week, Singapore Exchange Limited (SGX: S68), or SGX, released its fiscal 2023’s first half (1H FY2023) results.
The bourse operator reported a sparkling set of numbers as its net profit climbed 30% year on year to S$285 million.
Here are five highlights from the group’s latest earnings that investors should take note of.
Revenue and net profit both increased
For 1H FY2023, SGX saw its operating revenue rise 9.6% year on year to S$571.4 million.
Its Fixed Income, Currencies and Commodities (FICC) division saw the largest revenue jump at 35.4% year on year to hit S$154.3 million.
The equities division reported a smaller 3% year on year rise in revenue to S$344.7 million while Data, Connectivity and Indices (DCI) reported a small 0.9% year on year dip to S$72.5 million.
Operating profit for the group climbed 9.5% year on year to S$284.1 million.
Net profit surged by 30% year on year to S$284.6 million, but this number included several one-off and non-recurring items.
Adjusting for these items, SGX’s net profit would have risen by 7% year on year to S$237 million.
The bourse operator generated a positive free cash flow of S$163.1 million for 1H FY2023, though this was 32.2% lower than the S$240.4 million reported in the prior year.
SGX declared an interim dividend of S$0.08, unchanged from a year ago.
1H FY2023’s dividend stood at S$0.16 and the trailing 12-month dividend came in at S$0.32, giving SGX’s shares a trailing dividend yield of 3.5%.
A surge in derivatives volume
SGX’s derivatives business saw a boom in 1H FY2023.
Currency derivatives registered a 48% year on year surge to 18.6 million contracts while commodity derivative volumes jumped 38% year on year to 19.4 million contracts.
In particular, iron ore derivative volumes soared by 46% year on year to 17.1 million contracts, with 1H FY2023 recording the group’s highest-ever six-month iron ore volumes.
Equity derivatives revenue shot up 21% year on year to S$173.5 million and took up 30% of SGX’s revenue.
Total equity derivatives volume inched up 1% year on year to 90.4 million contracts, with the FTSE China A50 Index Futures making up slightly more than half of the total volume.
The popular derivative, however, saw a 3% year on year dip in trading volume but SGX’s Nifty 50 Index futures and options took up the slack by posting a 14% year on year jump to 14.4 million contracts.
Lower capital raising and equities traded value
Although derivatives performed well, SGX’s cash equities division saw revenue decline by 10% year on year to S$171.2 million on the back of lower average and total traded value.
Daily average traded value (DAV) and total traded value slipped by 7% and 8% year on year to S$1.1 billion and S$138.1 billion, respectively.
One reason for the weaker numbers could be the volatility in stock markets.
A total of four new IPOs raised just S$9.7 million in 1H FY2023 compared with six IPOs in the same period last year that raised S$1.3 billion.
Secondary fundraising nearly halved from S$4.4 billion to S$2.2 billion over the same period.
Encouraging progress for the foreign exchange division
SGX’s foreign exchange (FX) over-the-counter (OTC) business continues to do well.
This segment contributed just 6% to overall revenue but its ADV has already hit US$68 billion as the group migrated its clients to a new platform.
The business is on track to hit an ADV of US$100 billion in the near term and touts itself as the most liquid Asian FX futures in the world.
SGX’s CurrencyNode, an anonymous Asian FX trading platform, has also launched a new product called non-deliverable forwards.
A boost from China and India
Meanwhile, SGX is gearing up to commence full-scale operations for the National Stock Exchange of India (NSE) IFSC-SGX Connect.
This initiative will help to further strengthen the domestic and international liquidity pools for Nifty products.
Elsewhere, China’s recent border reopening should also benefit SGX’s derivatives platform as more investors tap on it for portfolio risk management and access.
Investors have good reason to cheer as both India and China look well-positioned to bring in higher trading volumes for SGX’s suite of derivatives and other products.
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Disclosure: Royston Yang owns shares of Singapore Exchange Limited.