SGX

SGX: SGX Securities trading volume in Mar extended its decline, while commodity activities grew and derivatives activities held steady. The total value of securities traded declined 25% y/y in Mar to $23.9b, in tandem with the 29% drop in average daily traded value to $1.1b. On a m/m basis securities traded value was 14% higher in Mar, partly due to Mar having an extra day versus Feb. Derivatives volume was steady at 9.5m contracts and up 18% on a m/m basis, led by a rise in volume from China A50 Futures (+23%), Indian Nifty Futures (+30%) and MSCI Taiwan Futures (+4%). A total of $5.5b (+41%) new OTC financial derivatives transactions were cleared, led by commodities, iron ore swaps and SICOM rubber futures. SGX’s recent 2QFY14 were broadly in line, with net profit of $75m (-1% y/y, -19% q/q), and revenue of $165m (+2% y/y, -10% q/q). The significantly lower sequential performance was due seasonality patterns, with 2QFY traditionally being the weakest quarter for the exchange. Going forward, management 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. Going forward, investors could expect SGX to be on the lookout for further tie-ups and JVs in the commodities and derivatives segment, as it attempt to diversify from its traditional securities business and increase its product offering. At the current price, SGX trades at 21.8x P/E, in-line with its regional peers of 22x. The street has a consensus TP of $7.55 with 6 Buy, 8 Hold and 2 Sell ratings.