Key Highlights from Singapore Exchange Limited’s 2017 Annual Report

As an investor, if we have time to do only one thing, we must read the annual report of the company we are invested in. It is the only document released yearly that contains the Chairman’s and/or Chief Executive Officer’s statement(s), operational highlights and the financial statements of the company, among others.

It is the only document released yearly that contains the Chairman’s and/or Chief Executive Officer’s statement(s), operational highlights and the financial statements of the company, among others.

Early last week, Singapore’s only stock market operator and regulator, Singapore Exchange Limited (SGX: S68), released its annual report for its full year ended 30 June 2017 (FY2017).

Here are two things that I found noteworthy from the annual report:

FY2017 performance at a glance

Source: Singapore Exchange Limited Annual Report 2017

For FY2017, revenue came down 2% year-on-year to S$801 million. Out of the S$801 million, bulk of the revenue, at 50%, was from Equities and Fixed Income. Derivatives took up 38% of revenue while Market Data and Connectivity contributed to 12% of sales.

Moving on, net profit declined 3% to S$340 million. Dividend per share was unchanged at 28 cents.

Return on equity, which reveals how efficient the management is in turning every dollar of shareholders’ money into profits, slipped to 34% in FY2017 from 36% in FY2016.

Letter from the Chairman and the CEO

Chairman, Mr Kwa Chong Seng and Chief Executive Officer, Mr Loh Boon Chye, gave some updates on the changes done in FY2017 and the changes that investors could see going forward.

On the securities market front, they said:

“Earlier this year, we mandated all Mainboard IPOs to allocate at least 5% or $50 million, whichever is lower, of their offer size to retail investors.

With the support of market participants, we will also proceed to implement enhancements to the equities market structure in November 2017.

As for the proposed introduction of a dual-class share (DCS) structure with appropriate safeguards, we are still evaluating the wide-ranging feedback received and will make a decision before the end of 2017.”

It is heartening to see SGX engaging stakeholders and hearing their views. With the new rule kicking in for companies that will be going public, there should be an increased retail participation in our equities market.

SGX will also be releasing an exchange-traded fund that “tracks an index created by SGX Index Edge as well as our first smart beta index which caters to investors looking for index-linked strategies”.

Moving on to the derivatives business, the leaders mentioned that SGX launched four new SGX Asian FX futures contracts – IDR/USD, MYR/USD, MYR/SGD and PHP/USD – in July this year.

They added that they will continue working with Baltic Exchange, which was acquired in November 2016, to “create and drive adoption of new benchmarks for Asian shipping routes”.

On the regulatory front, Mr Kwa and Mr Loh provided the following updates:

“The newly formed Singapore Exchange Regulation Pte. Ltd. (SGX RegCo), which is an independent regulatory subsidiary of SGX, is expected to commence operations in the first quarter of FY2018.

Aimed at enhancing the governance of SGX as a self-regulatory organisation, SGX RegCo will undertake all front-line regulatory functions and make more explicit the segregation of SGX RegCo’s regulatory functions from SGX’s commercial and operating activities. It will also have a separate board of directors from SGX.”

Separating the compliance and commercial roles should help to increase the market’s confidence in SGX as a regulatory body, especially after the S-chips scandal and penny stock crash.

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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 Limited. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.