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3 Things Investors Should Know About Singapore Exchange Limited’s Latest First Quarter Earnings

Last Friday, Singapore Exchange Limited (SGX: S68) released its earnings update for the first quarter of its financial year ending 30 June 2019 (FY2019). Let’s look at three main aspects of the announcement here.

Show me the money

Singapore Exchange’s revenue for the reporting quarter came in at S$208.9 million, up 2.2% year-on-year. The company has three primary business segments: Equities and Fixed Income; Derivatives; and Market Data and Connectivity.

Equities and Fixed Income’s revenue tumbled 13.3% to S$86.4 million. Derivatives’ revenue rose 21.3% to S$97.7 million, while Market Data and Connectivity’s revenue increased by 2.1% to S$24.7 million.

Singapore Exchange’s operating expenses climbed 4.1% to S$102.5 million. As a result, operating profit inched up by just 0.4% to S$106.4 million. Net profit also increased by just 0.4% to S$91.0 million, leading to earnings per share for the quarter being flat at 8.5 Singapore cents.

As of 30 September 2018, Singapore Exchange had S$840.4 million in cash on the balance sheet with no debt. This was an improvement from the end of FY2018 when Singapore Exchange’s net-cash position was S$831.6 million.

Free cash flow for the first quarter was S$88.4 million (S$98.2 million in operating cash flow and S$9.8 million in capital expenditure). This was an improvement compared to a year ago when free cash flow was S$74.1 million (S$102.7 million in operating cash flow and S$28.6 million in capital expenditure).

Loh Boon Chye, SGX’s chief executive, summarised the company’s performance in the latest earnings update:

“Our first-quarter performance demonstrates the diversity and resilience of our multi-asset business. We achieved strong record revenues in our derivatives business, while our securities market saw a pullback along with other regional stock markets, amid heightened volatility and emerging market weakness. During the quarter, we made strategic investments in companies that will enable us to expand our fixed income business and pursue the development of our digital marketplace for freight.”

Ka-ching!

In its earnings update for the fourth quarter of FY2018, Singapore Exchange said that it would pay a higher dividend of 7.5 cents per share quarterly, starting from the first quarter of FY2019. Singapore Exchange did just that – shareholders would be receiving an interim dividend of 7.5 Singapore cents per share for the first quarter of FY2019, up 50% from the dividend of 5.0 Singapore cents dished out a year ago.

What the future holds

Loh shared the following comments about the company’s outlook in the earnings update:

“Looking ahead, the continued market volatility will increase the demand for risk management and investment solutions. Our expanded MSCI Net Total Return index futures suite is gaining traction and will continue to deliver results, together with our broad range of Asian derivative products and recently developed FlexC FX futures. To cater to evolving investor needs, we will be extending our product offerings in the securities market. As we grow our global network and partnerships, we will also establish new offices in New York and San Francisco to acquire new customers and enhance client coverage.”

Singapore Exchange’s share price ended last Friday at S$6.95, translating to a trailing price-to-earnings ratio of 20.5 and a dividend yield of 4.3%.

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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 owns shares in Singapore Exchange Limited.