SGX H2 profit up 23.1% on derivatives trading, mulling over higher dividends amid revenue growth plans

SINGAPORE – The Singapore Exchange (SGX) said on Thursday that its net profit for the second half-year ended June 30 rose 23.1 per cent to $286.3 million from $232.7 million in the year-ago period.

This lifted the group’s earnings per share for the half year to 26.8 cents versus 21.8 cents the year before.

Operating revenue for the group increased 7.9 per cent year on year to $623 million from $577.4 million.

The revenue growth was credited mainly to a strong showing from the group’s currencies and commodities trading segment. Revenue from fixed income fell 27.7 per cent in the second half to $4 million, but this was more than offset by a 35 per cent growth in currencies and commodities revenue to $179.8 million.

On the flip side, revenue contributions from the cash equities segment fell 11.5 per cent to $175 million from $197.7 million.

SGX chief financial officer Ng Yao Loong said the decline is not surprising, due to the “unprecedented” pace of monetary policy tightening by major central banks. This has, in turn, crimped trading and public listing activity regionally and globally.

The number of new stock listings fell to eight for the 2023 financial year compared with 17 in the previous year. They raised $37.6 million compared with $1.9 billion the year before.

Regarding the pipeline of initial public offerings, SGX senior managing director Pol de Win said it is still a “hazy crystal ball”, with the near-term outlook a difficult one.

“But we are seeing some early signs of global activity resuming,” he said, noting that the “highest-quality issuers” in the more developed markets are likely to take the lead.

In the medium term, however, he is more optimistic. He said many companies have been privately capitalised for a long period of time, and they are likely to need liquidity.

For the full year, net profit rose 26.5 per cent to $570.9 million, while there was an uptick in revenue of 8.7 per cent to just shy of $1.2 billion, which the group attributed chiefly to derivatives.

Adjusted net profit, which excludes certain non-cash and non-recurring items that have less bearing on SGX’s operating performance, stood at $503.2 million for the 2023 financial year, up 10.3 per cent from $456.4 million in the previous financial year.

SGX’s board has proposed a final quarterly dividend of 8.5 cents per share, higher than the eight cents per share in the previous year.

The dividend is expected to be paid on Oct 20, after the record date of Oct 13.

If approved, the total dividend for financial year 2023 will stand at 32.5 cents per share, higher than the 32 cents per share in financial year 2022.

At a briefing to discuss the company’s latest financial results, SGX chief executive Loh Boon Chye said the group has set some targets – including medium-term revenue growth in the high single-digit percentage, as well as an increment to its dividend payouts by a mid-single-digit percentage of its compound annual growth rate.

However, Mr Loh was quick to stress that the dividend targets do not necessarily mean a change in the group’s payouts every quarter.

In financial year 2024, SGX is looking to keep its expenses to a year-on-year percentage growth in the mid-single-digit range, while capital expenditure is expected to be in the range of $75 million to $80 million – including an $8 million deferment from financial year 2023 – compared with $59 million.

Meanwhile, the group expects to hit its target of US$100 billion (S$136 billion) average daily volume by financial year 2025 or earlier, amid the “positive momentum” it is currently seeing.

Mr Loh said SGX’s currencies and commodities franchises have grown substantially. Both units attained record volumes in the period under review, he added.

He cited iron ore as a key example of a bright spot in the commodities area. The proportion of screen trading in iron ore climbed to 46 per cent in financial year 2023 from 29 per cent in the previous financial year.

SGX is also looking to maintain and solidify its position as the preferred venue for Asian equity derivatives.

Mr Loh said the group is “at the heart of international capital flows”, and will grow its presence through scaling its multi-asset offerings globally through its network, partnerships and geographical expansion of client coverage.

SGX shares fell 1 per cent or 10 cents on Thursday to close at $9.57 on a cum-dividend basis.

THE BUSINESS TIMES