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The Good And Bad That Investors Should Know About Singapore Exchange Limited’s Latest Quarterly Earnings

Stock exchange operator Singapore Exchange Limited (SGX: S68) reported its third quarter earnings update for its fiscal year ending 30 June 2018 (FY2018) two weeks ago. There are both positive and negative takeaways that investors may want to learn about.

The positives

Firstly, Singapore Exchange’s total operating revenue grew by 10% year-on-year to S$222 million (the highest level since the company’s listing), driven by growth in its Equities and Fixed Income, and Derivatives segments. Similarly, Singapore Exchange’s quarterly net profit hit a 10-year high of S$100 million, up 21% year-on-year.

Secondly, the company’s operating expenses grew at a slower pace than revenue for the quarter. As a result, Singapore Exchange’s operating profit increased faster than revenue on a year-on-year basis, up by 15% to S$118 million.

Thirdly, operating cash flow for the reporting quarter jumped by 28.7% from S$101.4 million a year ago to S$130.4 million. The increase in Singapore Exchange’s profit was the main driver for the higher operating cash flow.

Last but not least, Singapore Exchange continued to maintain a strong balance sheet. As of 31 March 2018, the company had S$800 million in cash on the balance sheet with no debt.

The negatives

Singapore Exchange had delivered a positive overall performance for the quarter. Yet, there are two negative points that investors should know.

Firstly, the Post Trade Services  sub-segment of the Equities and Fixed income business saw its revenue decline by 11% year-on-year to S$25.6 million. Singapore Exchange attributed the decline to a change in the mix of securities settlements, and a lower number of contracts processed as brokers had migrated the function to their own back offices.

Next, the Market Data and Connectivity segment experienced a 2% fall in revenue to S$23.9 million as an 8% fall in revenue at the Market Data sub-segment (to S$10.0 million) was only partially offset by a 2% increase in the Connectivity sub-segment’s revenue (to S$13.9 million).

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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 Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has a recommendation for Singapore Exchange Limited.