SGX Q1 net profit down 15% despite M&A surge

SGX Q1 net profit down 15% despite M&A surge

SINGAPORE Exchange (SGX) has shown its resilience relative to that of its peers, SGX chief executive Magnus Bocker has said.

He was commenting on SGX's results in the three months ended September, which indicated that sluggish volumes had dragged net earnings down 15.1 per cent in its first fiscal quarter, despite a spike in mergers and acquisitions (M&A).

The market operator said net profit attributable to shareholders slipped to $74.3 million, or 6.96 cents per share, in the quarter.

The results largely met market expectations. A poll of five analysts by Bloomberg had an average earnings forecast of 6.7 cents per share.

SGX is recommending an interim dividend of four cents per share, in line with its year-ago payout.

Trading volume during the quarter received a boost from the ongoing Fraser and Neave (F&N) M&A saga, which involves F&N, Asia Pacific Breweries and Thai Beverage Public Co, all listed companies.

M&A activity sent transacted volume on Aug 14 to a single-day record of $5.4 billion, SGX said.

But such a contribution was not enough to avert a year-on-year decline in average daily securities turnover, which eased to about $1.3 billion during the quarter from $1.6 billion a year ago, amid a global slowdown in trading activity. Securities revenue fell 19.4 per cent on the year to $58 million.

"They had a fair bit of contribution from M&A," said DMG & Partners analyst Leng Seng Choon, who was expecting a net profit of $72 million and said he did not expect to rerate his "sell" call on the counter.

The derivatives business was mixed, with average daily volume in the quarter at 306,811 contracts, compared with 322,152 contracts a year ago. Revenue was up by 4.7 per cent to $45 million.

Mr Bocker said the numbers were "creditable" in light of a broad slowdown for exchanges around the world.

SGX's 14 per cent year-on-year drop in transaction value was more resilient than the decline in global rivals Australian Stock Exchange, Hong Kong Exchange, London Stock Exchange, Deutsche Borse, Nasdaq and New York Stock Exchange - all of which posted slowdowns of more than 30 per cent - said SGX.

A similar story emerged in derivatives, where SGX's volume decline was smaller than that of its global peers.

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