Towards Financial Freedom

SGX - No Surprises

kiasutrader
Publish date: Fri, 18 Oct 2013, 10:42 AM
SGX  had a decent start to the year with 1QFY14  net profit up 24% y-o-y (+5%  q-o-q,  based  on  reported  net  profit)  to  SGD92m.  Average  daily turnover (ADT) in the securities market  was stable y-o-y but down 16% q-o-q  to  SGD1.3bn.  Meanwhile,  derivative  volume  posted  strong  y-o-y growth (+36% y-o-y). Our earnings forecasts and SGD8.10 FV (23x CY14 EPS) are unchanged. Maintain NEUTRAL.
- 1QFY14 results  in line.  SGX's 1QFY14 net profit of SGD92m (+24% yo-y; +5% q-o-q) was within our and consensus expectations, accounting for 25% of our and consensus full-year net profit estimates.
- Higher  clearing  fee,  better  derivative  volume  drive  y-o-y  profit growth.  Y-o-y,  while  average  daily  turnover  (ADT)  in  the  securities market was broadly stable at SGD1.3bn, securities revenue rose 15%. Average clearing fee increased to 3.2bps from 2.7bps a year ago, as the proportion  of  capped  trades  fell  to  35%  from  46%  in  1QFY13,  with institutions  trading  a  broader  range  of  stocks  and  retail  participationrising.  Turnover velocity, however, was weaker at 47% (1QFY13: 51%; 4QFY13:  55%).  Meanwhile,  derivatives  revenue  was  up  16%  y-o-y  as total  traded  volume  jumped  36%  y-o-y  to  26.4m  contracts,  led  by  the FTSE  China  A50  futures,  Nikkei  225  futures  and options, and iron  ore swaps. Q-o-q, revenue fell 9% reflecting weaker ADT (-16% q-o-q) and derivative volume (-16% q-o-q).
- Expenses broadly under control (+6% y-o-y; -6% q-o-q). Management continued  to  guide  for  FY14  operating  expenses  of  SGD320m-330m (FY13:  SGD300m).  Technology-related capital expenditure  is  expected be around SGD35m-40m.
- Dividend.  As  expected,  SGX  declared  an  interim  DPS  of  4  cents (1QFY13:  4  cents).  We  are  forecasting  FY14  total  DPS  of  31  cents (FY13: 28 cents), based on a net payout ratio of 90%.
- Forecasts. No changes to our earnings forecasts.
- Valuation and recommendation. We are maintaining our SGD8.10  FV,which is  based on target CY14 P/E of 23x (a  10% discount  to average P/E of 25x). Maintain NEUTRAL.

Source: OSK
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