SGX

SGX released 2QFY14 results which came in at the lower end of street estimates. Net profit was $75m (-1% y/y, -19% q/q), on the back of revenue of $165m (+2% y/y, -10% q/q). The significantly lower q/q performance was attributed to seasonality patterns, with 2QFY14 traditionally being the weakest quarter for the exchange. Revenue from the securities business, accounting for 32% of total group revenue (37% previously), fell 13% to $52.2m, as securities total traded value declined 18% to $64.1b. The fall in trading was partially offset by a 6% rise in average clearing fees to 3.2 b.p., due to an increase in uncapped trades. Derivatives revenue which also accounted for 32% of total group revenue was up 16% to $52.5m, as increased volumes for the FTSE China A50 futures, Nikkei 225 futures and options, and iron ore swaps contributed to its top-line. Total volumes grew 18% to 26.3m contracts, while average month-end open interest grew 45% to 3.6m contracts. During the quarter, a total of nine listings in the quarter raised $1.4b versus the eight listings which raising $0.8b y/y. Total equity funds of $2.6b were raised, compared with $2.1b previously, while a total of $33.7b was raised from 144 new bond listings, versus 90 bonds raising $39.7b y/y. Going forward, SGX guides that the global economy is showing moderate signs of recovery, and the exchange will continue to invest in new products and services, expand international distribution, and strengthen its regulatory and risk management capabilities. In the next few quarters, SGX aims to introduce products such as foreign exchange futures and new ASEAN equity index futures. At the current price, SGX trades at 20.5x forward P/E, in-line with its regional peers of 22x. Latest broker ratings as follows: CLSA maintains U/p with TP $7.00 Credit Suisse maintains Neutral with TP $7.00 Nomura maintains Neutral with TP $7.60 OCBC maintains Hold with TP $7.22 OSKDMG maintains Neutral with TP $7.80