Singapore Exchange ((SPXCY)) has held its Q2 earnings call. Read on for the main highlights of the call.
The recent earnings call for Singapore Exchange (SGX) reflected a generally positive sentiment, highlighting the company’s robust financial performance. The call underscored substantial revenue growth across various segments, alongside increased dividends and strategic expansions in derivatives and FX markets. Nevertheless, challenges were noted with rising staff costs, a declining interest coverage ratio, and impairment charges.
Record-Breaking Financial Performance
SGX Group reported record-high net revenue of S$646 million, marking a 15.6% increase. The adjusted net profit after tax (NPAT) reached S$320 million, a notable 27.3% rise year-on-year. Both adjusted operating profit and NPAT margins improved significantly, by 6.1% and 4.5% respectively, showcasing the company’s enhanced profitability.
Strong Growth in Cash Equities
The cash equities segment experienced a remarkable increase, with net revenue surging by S$35 million or 22%. This growth was paralleled by a 31% rise in the securities daily average value, which reached S$1.26 billion, indicating heightened investor interest and activity.
Derivatives Market Expansion
SGX saw a 14% increase in net revenue from the derivatives market, driven by a 20% boost in derivative daily average volume. The T+1 session played a crucial role, contributing 20% to the overall derivatives volume, underscoring SGX’s strategic market expansion.
OTC FX Business Growth
The OTC FX business reported a net revenue growth of S$14 million or 36%, with the average daily volume rising to $136 billion. Its EBITDA contribution to the group increased from 3% to 5%, reflecting its growing significance within the company’s portfolio.
FX Franchise Achievements
The FX franchise achieved a record average daily volume of over US$154 billion. The listed FX futures daily average volumes saw a year-on-year increase of 40%, highlighting SGX’s strong foothold in the FX market.
Dividend Increase
The Board declared a quarterly dividend of $0.09 per share, bringing the total dividends for the first half of FY 2025 to $0.18 per share, a 6% increase. This move reflects the company’s commitment to delivering shareholder value amid strong financial results.
Increased Staff Costs
Staff costs rose by $9 million or 6%, attributed to higher variable bonuses aligned with the company’s increased profits. This indicates SGX’s emphasis on rewarding performance but highlights a cost area that needs careful management.
Interest Coverage Ratio Decline
The interest coverage ratio dropped to 56 times from 113 times, primarily due to higher interest expenses linked to refinancing. This decrease signals a need for effective financial management to maintain favorable interest coverage.
Impairment and Adjustments
A $2 million impairment was recognized due to the underperformance of an associated company, alongside $5 million in adjustments from the amortization of purchased intangible assets. These factors reflect operational challenges that SGX is addressing.
Forward-Looking Guidance
CFO Daniel Koh reported a robust financial outlook, with expectations for full-year expenses to remain at the lower end of the 2% to 4% increase guidance. Capital expenditure is anticipated to be in the lower range of $70 million to $75 million. The company also declared an interim quarterly dividend increase, underscoring a positive forward-looking stance.
In summary, SGX’s earnings call revealed a strong financial performance with strategic expansions across key market segments. While challenges such as increased staff costs and a declining interest coverage ratio were noted, the company’s growth trajectory remains positive. Investors can take confidence in SGX’s robust revenue generation and commitment to shareholder returns.