SGX's fourth-quarter net profit surges to $96m

New CEO acknowledges need to do more to attract bigger IPOs, and not just from China

Singapore Exchange executives (from left) Mr Muthukrishnan Ramaswami, the president; CEO Loh Boon Chye; and chief financial officer Chng Lay Chew at yesterday's press briefing.
Singapore Exchange executives (from left) Mr Muthukrishnan Ramaswami, the president; CEO Loh Boon Chye; and chief financial officer Chng Lay Chew at yesterday's press briefing. ST PHOTO: AZIZ HUSSIN

Singapore Exchange's (SGX's) newly appointed chief executive Loh Boon Chye said he "didn't have to think hard" when the opportunity came to take up what he called a "unique, interesting role".

"I jumped at it," said Mr Loh, who took up the post on July 14, at a briefing yesterday after SGX unveiled a 24.3 per cent surge in fourth-quarter net profit to $96.2 million.

While activity on the Catalist board has been healthy, Mr Loh acknowledged the need to do more to attract bigger initial public offerings (IPOs). To that end, SGX is focusing on drawing listings not just from China, but also India and other markets in the region. He noted that 40 per cent of listed companies on the exchange come from outside Singapore.

The direct listings framework established with the China Securities Regulatory Commission has attracted a lot of interest from companies in China, Mr Loh said.

"But IPOs are dependent on market conditions. You need a healthy market because launching an IPO needs a good stable environment."

The uncertain and volatile global economic outlook poses challenges for SGX's securities business, but is a boon for its derivatives business - the biggest revenue contributor that now accounts for 38 per cent of its total revenues, up from 30 per cent a year ago.

Derivatives revenue increased 42 per cent year-on-year to $295.7 million, from $208.7 million. Securities revenues, which account for 27 per cent of total revenues, slid 8 per cent to $209.3 million, from $226.9 million a year ago.

"There's uncertainty and volatility. But let us also be mindful that Asia has one of the highest growth rates, and as the West continues to look towards Asia and companies need to grow, we will get opportunities to be a useful platform for them," Mr Loh said.

"If we can increase the number of stocks that market makers and liquidity providers participate in, and with more retail participation, that will... be helpful for our liquidity," he added.

SGX said the reduction of the board lot size - from 1,000 shares to 100 - has helped improve retail investors' access to higher-priced stocks. In the six months following the new rule, the monthly average number of retail investors trading Straits Times Index stocks rose 9 per cent to 45,330, from the preceding six months.

SGX posted an 8.8 per cent increase in net profit to $348.6 million for the full year ended June 30, while total revenues jumped 13 per cent to $778.9 million. For the fourth quarter, revenues rose 24.9 per cent to $215.6 million.

Excluding Energy Market Company's (EMC's) revenue of $18 million, revenues grew 11 per cent for full year 2015 from a year earlier. SGX completed the EMC acquisition on Oct 1 last year.

Derivatives business grew, supported by the FTSE China A50 Index futures, whose volume surged a whopping 220 per cent to 78.2 million contracts; and iron ore volumes, which soared 258 per cent.

Listing revenues grew 9 per cent due to a revision of listing fees. There were 34 new listings, raising $2.7 billion this fiscal year, against 34 new listings raising $4.8 billion in 2014. Total market capitalisation was $1 trillion as at June 30, unchanged from a year ago.

Earnings per share was 32.6 cents, up from 30 cents a year ago. Net asset value stood at 91.2 cents per share as at June 30, up from 86.2 cents per share a year ago.

SGX proposed a final dividend of 16 cents, payable on Oct 9, bringing total dividend to 28 cents a share, unchanged from last year.

The counter added 16 cents or nearly 2 per cent to finish at $8.23 ahead of its results briefing.

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A version of this article appeared in the print edition of The Straits Times on July 30, 2015, with the headline SGX's fourth-quarter net profit surges to $96m. Subscribe