6 Quick Things Investors Should Learn About Singapore Exchange Limited

Singapore Exchange Limited (SGX: S68) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their quarterly earnings presentations (the link for Singapore Exchange is here).

As a bourse operator and more, Singapore Exchange – or more popularly known as SGX – gets its revenue from a number of different sources. This is evident from its many different business segments: Securities; Derivatives; Market Data and Connectivity; Depository Services; Issuer Services; and Others.

Through these different segments, SGX levies fees from the listing of securities, as well as for the clearing of securities trades and derivative contracts. It also earns its keep by providing market data feeds for risk management and back office applications.

You can read more about SGX in here and here.

What’s behind SGX’s results?

Below are six useful things I learned from listening to SGX’s webcast of its latest presentation for its fiscal first-quarter results for the financial year ending 30 June 2016 (FY2016):

  1. Loh Boon Chye, SGX’s Chief Executive Officer, started off the earnings call with a summary of the latest quarterly earnings. He highlighted the healthy growth in the securities daily average traded value (SDAV) on the back of strong retail participation. On the other hand, the number of initial public offerings (IPOs) had lagged with only seven listings so far this year, raising a total of $0.1 billion. This compares with 13 listings that raised $1.9 billion a year ago.
  2. Loh also took time to highlight three major priorities for SGX. The first was to improve the liquidity of the securities market. The second priority was to diversify the company’s business mix through growing its currency futures market, launching a fixed income secondary market, and expanding its market data and index business. Last but not least, SGX plans to maintain its cost discipline and keep it calibrated to its business growth.
  3. Chng Lay Chew, SGX’s Chief Financial Officer, went through a summary of the financial figures for the reporting quarter. He noted that the Securities business made up 25% of FY2016’s first-quarter revenue while the Derivatives segment took up a hefty 41%. This compares with the selfsame figures of 29% for the former and 32% for the latter a year ago.
  4. The board of directors had declared an interim dividend of $0.05 per share for the quarter. Chng had touched on SGX’s commitment to pay out annual dividends which are no less than 80% of its annual net profit or $0.20 per share, whichever is higher.
  5. Muthukrishnan Ramaswami, SGX’s President, went through the different business segments. For the Securities segment, Ramaswami said that SGX will be looking to expand its market maker and liquidity provider program (MMLP) to more stocks after launching the program with the Straits Times Index (SGX: ^STI) components. Ramaswami said that the market makers and liquidity providers made up 18% of trades in the market space.
  6. A question was also asked about the recent transfer for a couple of companies from the Main-board to the Catalist-board. The enquiry was around whether this would change the flavor of the Catalist-board. For this question, Loh took the time to clarify the purpose of the Catalist-board. He felt that the board was there to help fast-growing companies that need capital to expand but are not quite at the stage for a mainboard listing yet. According to a news report, some companies may have elected to move to the Catalist-board due to the new minimum trading price (MTP) rule. The rule, which was introduced in March this year, stipulates that shares on the Main-board have to meet a 20-cent minimum in trading price. Failure to meet the MTP may require mainboard listed companies to either consolidate its shares or move to the Catalist-board. Companies that are still unable to meet the MTP four years after the rule’s introduction would even face delisting.

Foolish takeaway

To buy and hold a company’s shares for the long-term also means the need to  keep up with its developments.

The access to management teams via webcasts and/or transcripts gives the Foolish investor a fair chance to judge for themselves whether they would like to be invested alongside those teams. It also helps us put together a more complete thesis around a company and keep up with developments in its industry.

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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 contributor Chin Hui Leong doesn’t own shares in any companies mentioned.