SGX

SGX reported 3QFY14 results that were broadly in line, with net profit of $75.8m (-22% y/y, -1% q/q) and revenue of $165.6m (-13% y/y, flat q/q). The result brings 9M14 net profit to $243m (-2% y/y). The slowdown in the securities business segment which made up 32% of group revenue (40% previously) was the main drag, with revenue from the segment down 32% to $52.3m as total traded value of securities fell 35% to $67.4b. The impact of the fall in trading was partially offset by a 5% rise in average clearing fee to 3.1 basis points due to an increase in uncapped trades. Derivatives revenue inched up 2% to $52.3m, despite total volumes declining 5% to 26.3m contracts, largely due to a drop in volume of the Nikkei 225 futures. The corresponding period had previously seen a surge in demand, buoyed by heightened optimism on the Japanese economy. The decline was partially offset by a rise in volumes of the China A50 and iron ore futures and cleared iron ore swaps. During the quarter, a total of five listings raised $0.4b versus the $1.8b raised from six listings a year ago. Total equity funds of $0.7b were raised, compared to $1.5b previously, while $49.7b was raised from 117 new bond listings, versus $48.6b from 107 bonds in 3QFY13. Going forward, SGX remains confident that the securities market will recover over time and in the quarters to come, SGX will focus on a series of transformative initiatives in its securities market. The exchange will also continue to launch new products, expand international distribution, and strengthen its regulatory and risk management capabilities. At the current price, SGX trades at 23.0x annualized 9MFY14 P/E, in-line with its regional peers of 22x. Interim DPS of 4¢ was maintained. Latest broker ratings as follows: OCBC maintains Hold with TP $7.22 Phillip Securities maintains Neutral with TP $7.04