Singapore Exchange (SGX) Annual Report Summary and Analysis
The Singapore Exchange (SGX) recently released its annual report for the fiscal year 2024. Key points include an overview of its financial performance, strategic initiatives, and commentary on the broader market environment impacting its business.
1. Revenue Segmentation and Growth
- SGX revised its revenue reporting structure in FY2024 into four segments:
- Fixed Income, Currencies, and Commodities
- Equities – Cash
- Equities – Derivatives
- Platform and Others
- Revenue for FY2024 rose by 3.1% to S$1,231.7 million, up from S$1,194.4 million in FY2023. This growth was primarily driven by the Currencies and Commodities segment and Platform and Others. However, revenues from Equities – Cash and Equities – Derivatives showed declines.
- Excluding treasury income, total revenue rose 3.6% to S$1,094.2 million.
2. Profitability Metrics
- SGX recorded an EBITDA of S$702.2 million, compared to S$687.9 million in the previous fiscal year.
- Net profit attributable to SGX amounted to S$597.9 million, up from S$570.9 million.
- Earnings per share (EPS) increased to 55.9 cents, compared to 53.4 cents in FY2023.
- On an adjusted basis, SGX’s EBITDA stood at S$711.6 million, and adjusted net profit was S$525.9 million.
- Adjusted EPS was 49.2 cents, reflecting growth from 47.1 cents in FY2023.
3. Dividend Announcement
- The Board of Directors proposed a final quarterly dividend of 9.0 cents per share, an increase from 8.5 cents in FY2023, representing a 5.9% annualized increase. This dividend is subject to approval at the upcoming annual general meeting and is payable on 25 October 2024.
4. Market Challenges and Opportunities
- The SGX noted that the stock market’s success is influenced by multiple factors beyond its control, such as market volatility and liquidity.
- SGX emphasized that a more holistic approach is needed to strengthen Singapore’s equity market. This would involve focusing on both supply and demand sides of the marketplace. The organization is actively collaborating with stakeholders like the Monetary Authority of Singapore to enhance market vibrancy.
- There was a call for the development of a stronger domestic institutional asset management ecosystem to support the local stock market. SGX believes that supporting domestic demand is crucial to attract foreign investors and companies for listings.
5. Strategic Focus
- SGX is pursuing a multi-asset strategy, with a focus on growing its FX (Foreign Exchange) and commodities businesses, which are expected to drive medium-term growth.
- The organization aims to foster a more diverse demand base for equity markets, acknowledging the interconnectedness of liquidity, trading volumes, valuations, and IPO activities.
6. Valuation and Outlook
- SGX has a market capitalization of S$12.0 billion and currently trades at a 21.1x forward price-to-earnings (PE) ratio and a 6.1x price-to-book (PB) ratio.
- The dividend yield stands at 3.1%, which is relatively moderate compared to some other blue-chip stocks.
- The consensus target price for SGX shares is S$1.26, implying no significant upside from its current price level.
7. Outlook for the Equity Market
- SGX expressed concerns over subdued cash equity market volumes, noting that while there were signs of improvement in the latter half of FY2024, more structural efforts are necessary to enhance liquidity.
- The formation of a Review Group aimed at strengthening Singapore’s equity market is seen as a positive step towards addressing these structural challenges.
8. Conclusion
- SGX has demonstrated resilience through its revenue growth and profitability improvements, particularly in its Currencies and Commodities segment. However, challenges remain in the equity market, particularly with cash and derivatives trading.
- The organization is placing a strong focus on collaboration with regulators, market participants, and other stakeholders to address the structural issues in the equity market, while its multi-asset strategy continues to drive medium-term growth.
Thank you
