Singapore Exchange Limited: 3 Things Investors Should Know From Its Latest Earnings

Singapore Exchange Limited (SGX: S68) is the only stock exchange operator in Singapore.

Two weeks ago, Singapore Exchange, or SGX for short, reported its third quarter earnings for its fiscal year ending 30 June 2017 (FY2017). Let’s look at three useful pieces of information that investors may want to know from the announcement:

1. The overall result

The following table shows some important numbers from SGX’s income statement for the third quarter of FY2017 and FY2016:

Source: SGX third quarter FY2017 results announcement

In all, we can see that the company’s operating revenue and earnings per share were both down by single-digit percentages. The larger decline in its EPS was driven mainly by a one-off loss that was recorded on the sale of the company’s stake in Bombay Stock Exchange. Excluding the loss, SGX’s net profit in the third quarter of FY2017 would have been down by 2% compared to the same quarter a year ago.

2. Segmental performance

There are three main business segments within SGX, namely, Equities & Fixed Income, Derivatives, and Market Data & Connectivity.

In particular, Equities & Fixed Income is comprised of three other sub-segments: Issuer Services, Securities Trading & Clearing, and Post Trade Services. All three sub-segments enjoyed revenue growth during the reporting quarter.

Market Data & Connectivity had a good quarter as its revenue was up 13% due to higher data usage and growth in the colocation services business.

The Derivatives segment was the laggard in the quarter as its revenue fell by 9% mainly due to an 18% drop in volumes, offset marginally by an improvement in the average fee per contract.

3. The future outlook

SGX provided the following outlook on its business in its earnings release:

“Our results this past quarter saw continued momentum in the equities market following the US Presidential Election, with increased participation seen from both retail and institutional customers. While sentiments have improved, positive outcomes on US economic policies will be important to sustain trading activities. We remain committed to executing our strategic objectives and diversify our business mix.

As previously guided, operating expenses for FY2017 are expected to be between $405 million and $415 million. Technology-related capital expenditure is expected to be between $65 million and $70 million. We will continue to exercise cost discipline while investing in growing our business.”

To sum it up, SGX saw an improvement in market sentiment and also aims to grow through diversification and cost discipline.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore Exchange. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.