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 this 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 third-quarter results for the financial year ending 30 June 2016 (FY2016):

  1. Loh Boon Chye, SGX’s Chief Executive Officer, gave an overview of the quarter’s figures and the the results year to date. In light of the challenging market conditions, he felt that SGX’s results were resilient. Loh also said that SGX will be grouping three businesses lines, namely issuer services, securities trading and clearing and post trade services into one unit – that is under equities and fixed income. He said that this grouping will help drive efficiency.
  2. Next up, Chng Lay Chew, SGX’s Chief Financial Officer, dived deeper into the financial figures for the quarter. SGX’s third quarter topline grew due to three factors: higher securities daily average traded value (SDAV), higher volumes of institutional securities settlement and higher total traded volume on derivatives. Notably, the derivatives business made up 40% of the third quarter’s revenue, making it a significant revenue contributor.
  3. Expenses-wise, staff cost and technology cost topped to the list. Staff cost was 38% of expenses while technology cost was 31%. The former rose due to higher average headcount. Chng said that SGX’s operating margin remained high at 50%.
  4. Loh said that SGX is looking to launch the MSCI China Free Index derivative contracts in early May. He added that the aforementioned index has a broader representation of key sectors. It will also be open to participation from US investors.
  5. Tan Boon Gin, Chief Regulatory Officer, gave an update on regulatory matters. An online calendar was launched for listed companies to schedule their annual general meeting dates. This was in response to the clustering of AGMs around the last two weeks of April. Tan also said that SGX sought public feedback for matters like the allocation of 10% of Mainboard IPOs (initial public offering) for retail investors.    
  6. Loh rounded out the presentation by giving a brief outlook for SGX. He said the expectation was for competition to increase and global market conditions to be volatile. He said that SGX will remain focused on its priorities: to diversify its business mix, to work on its market data business and maintaining a discipline on cost. Loh said that SGX’s full-year expenses will be on the lower end of its guidance of between $415 million to $420 million.  

Foolish takeaway

To buy and hold for a company for the long term also means keeping up with developments in the company.

The access to management teams via webcast gives the Foolish investor a fair chance to judge for themselves on whether they would like to be invested alongside the management teams that they have chosen. It also helps us put together a more complete thesis around the 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.