Singapore Exchange’s Fiscal 2021 First Half Results: 3 Key Things You Should Know

2021-01-24     thesmartinvestor
Singapore Exchange’s Fiscal 2021 First Half Results: 3 Key Things You Should Know

The earnings season has kicked off in full swing.

One of the first few companies to report its earnings is Singapore Exchange Limited (SGX: S68), or SGX.

SGX is Singapore’s sole stock exchange operator. It runs a platform for the buying and selling of a wide variety of securities such as equities, bonds and derivatives.

Investors should note that SGX’s fiscal year-end is 30 June, hence the latest report is for its fiscal 2021 first-half results.

Coming off the heels of a successful full fiscal year 2020 earnings, where the bourse operator reported a record high revenue since listing, expectations were high for a good performance from the group.

And on this front, SGX did not disappoint.

Here are three aspects to take note in its latest earnings release.

Growth across all business segments

Prior to the latest report, SGX had reorganised its business divisions into three key segments: Fixed Income, Currencies and Commodities (FICC), Equities and Data, Connectivity & Indices (DCI).

For the first half of FY2021, the group reported broad-based growth across all three business segments.

FICC’s revenue jumped 17% year on year to S$99 million, driven by a surge in trading and clearing revenue which saw a 36% year on year increase.

However, SGX did disclose that the better performance was due to the acquisition of BidFX in July last year.

As a recap, BidFX is a leading cloud-based foreign exchange trading platform for institutional investors.

If BidFX was excluded, FICC revenue would have declined by 3% year on year.

Revenue for the equities segment inched up 3% year on year to S$351 million, driven by a 19% year on year rise in daily average traded value and total traded value.

DCI’s revenue soared 35% year on year to S$71 million.

The increase was mainly due to the consolidation of Scientific Beta which was acquired in January 2020 for €186 million.

Excluding Scientific Beta, revenue would have inched up 3% year on year to S$53.7 million.

Dividends and additional disclosures

The group also declared an interim dividend of S$0.08 for the current quarter, up from S$0.075 a year ago.

For the first half of the fiscal year 2021, the total dividend declared was S$0.16, up 7% year on year from S$0.15.

Meanwhile, SGX has, for the first time, provided additional disclosures to better reflect its underlying performance.

These financial adjustments exclude items that have no bearing on its core operating performance.

Two new metrics disclosed were adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) and adjusted net profit after tax (NPAT).

Adjusted NPAT removed the effects of gains from long-term investments, amortisation of intangible assets and acquisition-related expenses.

Adjusted EBITDA removed one-off adjustments as well as acquisition-related expenses.

Both adjusted EBITDA and NPAT rose 7% year on year after incorporating these changes, slightly lower than the 8% and 12% recorded, respectively, had the adjustments not been put through.

Acquisitions to further boost revenue

Looking ahead, SGX expects its acquisitions to continue driving overall group revenue.

Recently-acquired subsidiaries BidFX and Scientific Beta contributed around 6% of SGX’s total revenue in the first half of the fiscal year 2021.

Management expects this contribution to rise as the two subsidiaries tap on SGX’s capabilities to execute their growth plans.

Loh Boon Chye, CEO of SGX, commented that growth will continue to be driven by strategic partnerships and collaborations, acquisitions and new product offerings such as ETFs.

Get Smart: Partnership with Temasek

On the same day as the release of its results, SGX also announced that it had set up a new joint venture with Temasek Holdings, Singapore’s sovereign wealth fund.

This partnership has the aim to advance digital asset infrastructure in capital markets and is set to be Asia-Pacific’s first exchange-led digital asset venture.

In August last year, SGX worked with Temasek and HSBC Holdings (LON: HSBA) for the issuance of Asia’s first syndicated digital bond for Olam International (SGX: O32).

This joint venture seeks to partner with fixed income issuance platforms to provide issuers, banks, lawyers and investors with a comprehensive network for Asian bonds.

In turn, this initiative will lead to a more vibrant bond market for Asian corporations and help them to advance their growth plans.

At the same time, the partnership will also focus on other areas such as funds and sustainable finance that are seeing increased demand.

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Disclaimer: Royston Yang owns shares in Singapore Exchange Limited.

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