19 October 2012
SINGAPORE EQUITY
Investment Research
DMG & Partners Research 1QFY13 Results Review Private Circulation
Only
FINANCE
SGX SELL
Price S$6.85
Previous S$5.30
Target S$5.30
Finance
SGX operates the securities and derivatives exchange in Singapore and their related clearing
houses.
Stock Profile/Statistics
Bloomberg Ticker SGX SP STI
3060.4
Issued Share Capital (m) 1068.4
Market Capitalisation (S$m) 7318.5
52 week H L Price (S$) 7.35 5.91
Average Volume (3m) '000 1798.9
YTD Returns (%) 11.7
Net gearing (x) Net Cash
Altman Z-score 6.4
Beta 1.01
ROCE/WACC 3.49
Book Value/share (S¢) 66.1
Major Shareholders (%)
SEL Holdings 23.4
Tokyo Stock Exchange 5.0
Share Performance (%)
Month Absolute Relative
1m -3.8% -3.2%
3m 4.4% 2.9%
6m 1.9% -0.5%
12m 11.6% -0.8%
6-month Share Price Performance
M&A helped drove ADT stronger sequentially
Sequentially stronger ADT, but still below our FY13 assumption. SGX reported 1QFY13
net profit of S$74m, down 15% YoY. This is close to our forecast S$72m. ADT of S$1.33b
was down 15% YoY, and is a key contributor to the decline in revenue. This was partly offset by a
5% YoY rise in derivatives revenue. An interim dividend of 4.0S¢ was declared, similar to that in
FY12. We are assuming FY13 and FY14 securities ADT of S$1.5b and S$1.68b
respectively, and maintain our earnings forecast. Our target price of S$5.30 is pegged to
17x FY14 EPS, which is close to minus-one standard deviation from the historical P/E average of
24x. We applied a discount given the tough market conditions. Maintain SELL. There is also the
risk that ADT could come in below our assumptions, which could lead to further share price
weakness.
Revenue declined 10% YoY, with the 19% YoY decline in securities revenue partly offset by
derivatives market’s 5% YoY expansion – derivatives account for 28% of SGX revenue, which
is lower than securities’ share of 36%. Derivatives volume fell 5% YoY to 307k
contracts daily average, but this was more than offset by collateral management income surging
37% YoY, resulting in an overall revenue expansion for derivatives. ADT rose 19% sequentially,
and this was partly attributed to M&A activities (particularly F&N-related) which took place
during the quarter. Although we have not factored significant M&A activities in subsequent
quarters, we have optimistically assumed stronger ADT in the remaining three quarters of the FY.
Expenses fell 3% YoY to S$73m, with SGX maintaining cost discipline. To improve
transparency, SGX has guided for FY13 expenses between S$295 &
305m.
FYE Jun (S$m) FY10 FY11 FY12 FY13F FY14F
Turnover 639.7 660.7 647.9 677.5
722.4
Net Profit 320.1 294.9 291.8 311.5
333.6
% chg YoY 4.7% -7.9% -1.1% 6.8%
7.1% Consensus
320.8 358.2
EPS (S¢) 30.1 27.6 27.3
29.2 31.2
DPS (S¢) 27.0 27.0 27.0
26.2 28.1
Div Yield 3.9% 3.9% 3.9% 3.8%
4.1% ROE 38.9% 36.0% 35.2%
36.7% 37.9%
ROA 22.7% 17.9% 16.1% 17.8%
18.6% P/E (x) 22.8 24.8 25.1
23.5 Source: Company data and DMG Estimates
DMG & Partners Securities Pte Ltd may have received compensation from the company(s) covered in
this report for its corporate finance or its dealing activities; this report is therefore
classified as a non-independent report. Please refer to important disclosures at the end of this
publication.
DMG Research 1