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Three Things To Like About Singapore Exchange

SGX logo singapore exchangeOne thing that Warren Buffett likes to look for in a business is simplicity. Another thing that he warms to is a company with a high profit margin. And a third thing that Buffett likes is a business that uses its cash flow to benefit shareholders.

All three of these attributes can be found in Singapore Exchange (SGX: S68).

Singapore Exchange runs a pretty simple business. That is not to say that it is an easy business to run. The company owns and operates Singapore’s security exchange, which allows companies to list and trade their shares. Singapore Exchange also provides broker services for the derivatives market that allows traders to bet on things that include the direction of equity indices, interest rates and commodity prices.

As Singapore’s premier exchange, Singapore Exchange enjoys a high Net Income Margin. The amount of profit that Singapore Exchange makes on every dollar of sales is one of the highest in the Singapore market. While the average Net Income Margin for the 30 companies that comprise the Straits Times Index (SGX: ^STI) is a respectable 19%, SGX makes $45 on every $100 of revenue.

Singapore Exchange also rewards investors with a share of its spoils. Since 2001, the company has yet to miss a dividend payment. At the turn of the Millennium, it paid seven cents a share – last year it distributed 27 Singapore cents per share, which translates to a historic dividend yield of 3.8%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.