Singapore Exchange Limited’s Latest Earnings: Starting The Year With A Bang!

On 29 July 2015, Singapore’s sole bourse operator Singapore Exchange Limited  (SGX: S68) reported its fourth-quarter results for its fiscal year ended 30 June 2015 (FY2015); it was the company’s best year since FY2009.

Yesterday, Singapore Exchange announced its first-quarter results for FY2016 and it seems that the growth-momentum has carried on from FY2015. Let’s dig in further.

Financial highlights

For the quarter, Singapore Exchange saw a 30% year-on-year increase in its revenue to  S$220 million. The solid top-line growth had dripped all the way to the bottom-line as the bourse operator’s net profit rose 28% to S$99 million.

There’s good news beyond the higher revenue and profit. Singapore Exchange’s balance sheet remains rock-solid (as of 30 September 2015, the bourse operator had S$886.2 million in cash and zero debt) and its free cash flow had grown by 19% from S$S$79.6 million in the first-quarter of FY2015 to S$94.8 million in the reporting quarter.

Singapore Exchange has also decided to share the spoils with its shareholders; the company had upped its interim dividend for the reporting quarter by 20% from 4 cents per share a year ago to 5 cents per share.

Business highlights

Singapore Exchange classifies its business into five main segments, namely, Issuer Services, Securities, Depository Services, Derivatives, and Market Data & Connectivity. All the segments – except for Issuer Services – had contributed to Singapore Exchange’s growth in the reporting quarter.

The Securities segment is one of the most important for the company and it saw a 14% year-on-year jump in revenue to S$55.9 million in the reporting quarter. Singapore Exchange reported growth in the securities daily average traded value (SDAV) and strong improvement in retail participation in the market after the reduction of the board lot size earlier this year in January. To the latter point, the company said:

“Based on the past 9 months, there was an 11% increase in overall retail SDAV and a 24% increase in retail SDAV in STI [Straits Times Index (SGX: ^STI)] stocks.”

Singapore Exchange’s largest revenue contributor, the Derivatives segment, experienced a 69% spike in revenue to S$90.9 million from a year ago. The segment’s growth came mostly from a 164% year-on-year surge in the trade volume for its SGX FTSE China A50 Index futures.

Market data & connectivity saw a 12% improvement in revenue to S$21.6 million. Singapore Exchange had enjoyed higher derivatives market data sales and growth in colocation services.

The Depository Services segment ended the reporting quarter with revenue of S$29.7 million, an improvement of 24% from the year before. Higher trading volume in the securities market and an increase in the number of account-openings by Depository Agents contributed to the segment’s growth.

We’re down to the sole laggard for the quarter, the Issuer Services segment. Revenue there had dipped by 6% year-on-year to S$21.4 million largely due to a drop in the number of new equity and bond listings in the reporting period as compared to a year ago.

In all, Singapore Exchange had enjoyed an impressive quarter. But, management did warn that the increase in revenue was mainly due to heightened volatility in global markets in recent months. If volatile conditions were to continue, coupled with weak market sentiment, there might be a risk that the high volume of trade experienced by Singapore Exchange might not continue over the next few quarters.

Nonetheless, management is still confident about the long-term prospects of the company and “will continue to invest in growing [the] business.”

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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 writer Stanley Lim does not own any companies mentioned above.