SGX

SGX: may pull back after reporting disappointing 1QFYJun11 net profit of $74.2m, -21% yoy, -6.8% qoq. This compares with consensus expectations of $82.3m. Earnings dropped due to combination of lower securities daily avg trading value and higher operating expenses arising from technology upgrades…

But downside may be limited as mgt gives optimistic outlook. Says if current mkt conditions prevail, SGX should benefit from increase in capital mkt activities (both higher trading activity, more cos seeking to raise capital). Upcoming initiatives such as ADRs listing on Oct 22, retail investors' corporate bond trading, introduction of Chi-Next the first pan-Asia dark pool venture, all point to higher revenue for SGX going forward. Quarterly div of 4cts/sh further reflects mgt’s confidence...

The majority of Street has Buy rating on stock, with latest targets ranging btwn $10-11.20. Pullbacks may present opportunities to accumulate.