THE Singapore Exchange : S68 +0.62% (SGX) will adjust the conversion price of its 240 million euro zero coupon guaranteed convertible bonds due 2024 to S$12.0532, from the current S$12.264.

 

On Thursday (Sep 28), the bourse said this accounts for a S$0.085 per-share dividend to be approved at SGX&rsquo s upcoming annual general meeting on Oct 5.

 

The adjusted conversion price of S$12.0532 is effective from Oct 16. Any exercise of conversion rights prior will be based on the current conversion price, or S$12.264.

 

Share transfer books and register of members of the company will be closed from 5 pm on Oct 13 for the preparation of dividend warrants. The payment of the final dividend will be made on Oct 20.

 

If approved, the total dividend payout for FY2023 will stand at S$0.325 per share, higher than the S$0.32 per-share payout in FY2022.

 

Through its indirect wholly-owned subsidiary, SGX Treasury I, SGX fully placed out the bonds in February 2021 at an initial conversion price of S$13.0944.

 

The offer was over four times subscribed at 101 per cent of the principal amount of the convertible bonds due Mar 1, 2024.

 

The bonds are convertible into ordinary shares in SGX, and the payment is fully guaranteed by SGX.

 

LOH Boon Chye, chief executive of the Singapore Exchange (SGX) Group, has been elected the new chairman of the World Federation of Exchanges (WFE). He will serve a 2-year term with the global industry association.

 

He is among seven newly-elected board directors at the WFE. The appointments were announced at the WFE&rsquo s 62nd general assembly held in London.

 

Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 250 market infrastructure providers, including standalone central counterparty clearing houses that are not part of exchange groups.

 

Loh is currently the vice-chairman of the WFE according to its website. He will be taking over from current president Edward T Tilly, who is chairman and CEO of Cboe Global Markets.

 

The WFE board comprises 18 leaders from around the world. Jos Dijsselhof, CEO of SIX Group, was elected vice-chairman, while John McKenzie, CEO of TMX Group, was elected working committee chairman. Both were elected to two-year terms.

 

The other newly elected board directors are Greg Wojciechowski, president and CEO of the Bermuda Stock Exchange Fredric J Tomczyk, CEO of Cboe Global Markets Hiromi Yamaji, group CEO of Japan Exchange Group and Byungdoo Sohn, chairman and CEO of the Korea Exchange.

 

Loh said in a statement: &ldquo It is my privilege to serve as chairman of the WFE to help promote the association&rsquo s mission in fostering a transparent, collaborative and innovative ecosystem for global financial markets.&rdquo

 

He added that he is looking forward to working closely with the WFE and the board to advance the group&rsquo s priorities in areas such as market infrastructure resiliency, mutual market connectivity, as well as sustainability and inclusion.

 

Welcoming the new chairman, vice-chairman and working committee chair, WFE&rsquo s CEO Nandini Sukumar said: &ldquo Their knowledge and experience of the sector will be a great benefit to us as we continue to promote resilient, open and interconnected markets globally, as the voice of the industry.&rdquo

 

Citi Research analyst Tan Yong Hong has downgraded his call on Singapore Exchange (SGX) S68 0.2% to &ldquo sell&rdquo from " buy" with a lower target price of $9 from $10.10 previously.

 

The downgrade comes after the exchange&rsquo s share price outperformance, which Tan attributes to its robust derivative volumes recorded in August.

 

Shares in SGX closed at $9.95 on Sept 20, nearly reaching its 52-week high price of $9.98.

 

SGX&rsquo s earnings for the FY2023 ended June 30 also beat Tan&rsquo s expectations due to its treasury income. However, due to its higher share price, the exchange&rsquo s &ldquo muted dividends growth&rdquo drove its yield closer to 3.5% or -1 standard deviation of its historical range.

 

In his report dated Sept 20, Tan notes that there may be downside risks as market watchers are expecting to see a &ldquo sharply higher&rdquo final dividend per share (DPS) for the FY2024.

 

According to Tan, the consensus is pencilling in a total dividend of 35 cents per share in FY2024 and 36 cents per share in FY2025. This implies a quarterly dividend of 9.5 cents from 8.5 cents previously in the 4QFY2024.

 

&ldquo While we lift our FY2024/FY2025 earnings by 4% - 7%, these are driven by treasury income that should not lead to higher dividends,&rdquo Tan writes.

 

Based on SGX&rsquo s latest market stats as at Sept 19, derivative volumes looked weaker on a m-o-m basis driven by A50, TW, SG and iron ore contracts, while SGX&rsquo s securities daily average value (SDAV) also looked softer.

 

To this end, Tan is forecasting SGX&rsquo s total SDAV for the FY2024 to come in at $1.08 billion and derivatives daily average volume (DDAV) at 1.035 million contracts.

 

&ldquo With modest earnings per share (EPS) growth alongside muted DPS upside, we think recent share price outperformance presents an opportunity for investors to take profits,&rdquo he adds.

 

The revised target price implies a valuation of 19x SGX&rsquo s FY2024 P/E versus a 3.8% target yield assuming stable dividends.

COMPANIES listed on the Singapore Exchange (SGX) that have released quarterly financial results or updates for the quarter to June reported aggregate profits of S$7.1 billion, a 16.7 per cent increase year on year.

 

A compilation of the results by The Business Times (BT) as at end-August showed 57 of the 82 issuers were profitable for the quarter to June, while 25 were in the red. Of the 57 profitable companies, 26 posted a smaller bottom line. Another 23 managed to improve their earnings, and eight swung back into profitability from a loss in the year-ago period.

 

Nine of the companies in the red managed to cut their losses, but 12 saw their losses balloon, and four became loss-making during the quarter.

 

CGS-CIMB Securities (Singapore) noted that companies with earnings beats were from the sectors of finance, capital goods (excepting Seatrium, due to its higher-than-expected kitchen-sinking provisions), transport, gaming and healthcare.

 

The local banking trio topped the earnings tally, with national carrier Singapore Airlines just behind.

 

DBS&rsquo bottom line rose 44.8 per cent year on year to S$2.6 billion, as its net interest margin (NIM) edged up to 2.16 per cent from 2.12 per cent in the preceding quarter.

 

UOB posted S$1.4 billion in earnings, 27.1 per cent higher than the corresponding period in the previous year. NIM for the lender&rsquo s second quarter stood at 2.12 per cent, down from 2.14 per cent a quarter earlier.

 

OCBC delivered S$1.7 billion at the bottom line, up 33.5 per cent year on year. Its NIM was the highest among the trio, at 2.26 per cent, but that represented a marginal decline from 2.3 per cent in the prior quarter.

 

Phillip Securities Research made a modest upgrade to its expectations of bank earnings &ndash of around 5 per cent &ndash due to higher-than-expected interest margins.

 

The research house has, however, downgraded its earnings expectations for issuers in other sectors, due to softer-than-expected revenue amid sluggish macro conditions, a stronger Singapore dollar and rising interest rates.

 

&ldquo This was prominent in the electronics and consumer sectors,&rdquo said Paul Chew, head of research at Phillip.

 

CGS-CIMB also pointed out that the slowdown in the technology sector continued to bite amid a sluggish economy. Results of semiconductor test solutions provider AEM Holdings and precision manufacturer Grand Venture Technology came in below its forecasts.

 

Nanofilm Technologies International&rsquo s results were in line only because CGS-CIMB had adjusted its expectation following the nanotechnology solutions provider&rsquo s prior profit warning.

 

DBS Group Research, however, is cautiously optimistic that Q2 2023 represented an inflection point, with a gradual recovery from H2 2023 led by demand for artificial intelligence.

 

UMS Holdings is one of the issuers the research team expects to do well because of its key customer&rsquo s latest above-expectation guidance, as well as recent contracts bagged by the precision engineering group specialising in front-end semiconductor components.

 

Meanwhile, companies in the industrial sector have reinforced the bullish views of DBS Group Research. Sembcorp Industries, Yangzijiang Shipbuilding and reopening beneficiaries Singapore Technologies Engineering as well as airline maintenance, repair and overhaul services provider SIA Engineering delivered earnings that beat the research house&rsquo s expectations.

 

DBS Group Research also said Seatrium (formerly Sembcorp Marine) and in-flight caterer and ground handler Sats have their ongoing earnings recoveries intact. It had expected wider net losses from these two Straits Times Index component stocks because of higher non-operating expenses or provisions from their recent corporate actions.

 

Wong Di Ming, research analyst at bond information platform Bondsupermart, observed that companies with a focus on real estate development, such as Heeton Holdings and Tuan Sing Holdings, posted &ldquo poor&rdquo performances.

 

It reflected the impact of burgeoning finance costs even as these developers reported an increase in revenues, Wong said.

 

CGS-CIMB attributed the lacklustre results of property developers and brokers to a lack of divestment gains, slower monetisation activities and reduced market transaction volumes.

 

The two macro factors dictating earnings in H2 2023 will be the trajectory of interest rates and the pace of recovery in electronic exports, Phillip&rsquo s Chew told BT.

 

Although banks should do well for the second half, upside might be capped.

 

Wong of Bondsupermart said banks in Singapore are expected to continue benefiting from high net interest income, although they might start to see a slight increase in funding costs. The main concern will be the management of operating costs given the continued inflationary pressure.

 

He added: &ldquo On the other hand, the loan books for the Singapore banks remain relatively healthy (given their exposures compared with foreign banks), and currently appear unlikely to be further impacted by the uncertain economic outlook.&rdquo

 

DBS Group Research favours industrials for their resilience and robust order book.

 

ComfortDelGro is one of DBS Group Research&rsquo s other picks as its public transport and taxi and private hire segments recover, the newly introduced platform booking fee lifts its earnings and improvement in overseas businesses pave the way for better sequential earnings.

 

CGS-CIMB has lowered its earnings forecasts for seven sectors for H2, including commodities, technology, telecommunications and property.

The Singapore Exchange (SGX) Group S68 -0.31% has reported earnings of $570.9 million for the FY2023 ended June 30, 26.5% higher than FY2022&rsquo s earnings of $451.4 million.

 

Earnings per share (EPS) for the year stood at 53.4 cents.

 

Revenue rose 8.7% y-o-y to $1.19 billion mainly due to higher derivatives revenue, which grew by 27.2% y-o-y. Revenue for derivatives includes equities derivatives, currencies and commodities futures and options trading and clearing revenue and associated treasury income. Total treasury income grew by $88.9 million.

 

Ebitda rose by 8.5% y-o-y to $687.9 million.

 

On an adjusted basis, SGX&rsquo s net profit stood at $503.2 million, 10.3% higher y-o-y. Adjusted EPS stood at 47.1 cents while adjusted ebitda was up by 8.0% y-o-y at $688.6 million.

 

Commodity derivatives volume increased 35.4% to 41.0 million contracts while currency derivatives volume increased 28.7% to 36.7 million contracts. OTC FX average daily volume (ADV) increased 7.3% to US$75.8 billion ($103.08 billion).

 

The increase in treasury and other revenue was driven mainly by higher treasury income and the full-year consolidation of MaxxTrader, which was acquired in January 2022.

 

Equities revenue, which comprises cash and derivatives, increased by 1.5% y-o-y to $709.2 million.

 

Equities &ndash cash fell by 10.9% y-o-y to $346.1 million as revenues from listing, trading and clearing as well as securities settlement fell on a y-o-y basis.

 

FY2023 saw eight new equity listings raising $37.6 million, down from the 17 seen in FY2022 which raised $1.9 billion. The group raised secondary equity funds of $4.8 billion, down 15.8% y-o-y.

 

Daily average traded value (DAV) fell by 13.4% y-o-y to $1.1 billion while total traded value &ndash which is made up of cash equities and other products &ndash fell by 14.1% y-o-y to $275.5 billion. Total traded value for cash equities and other products fell on a y-o-y basis. There were a total of 250 trading days in the year, down from the 252 days in the year before.

 

Equities &ndash derivatives rose by 17.0% y-o-y to $363.1 million as trading and clearing revenue stood comparable at $281.6 million. Treasury and other revenue surged by 2.8 times to $81.5 million from $28.6 million previously mainly due to higher treasury income. Trading and clearing revenue was impacted by lower trading volumes and partially offset by higher average fees in key equity derivatives contracts.

 

Data, connectivity and indices revenue dipped by 0.2% y-o-y to $147.1 million thanks to the increase in connectivity revenue and offset by the lower market data and indices revenue. Market data and indices revenue declined mainly due to lower revenue from the group&rsquo s index business while connectivity revenue rose due to the upselling of connectivity services to existing clients and the introduction of new GIFT Connect-related co-location and network services.

 

A proposed final quarterly dividend of 8.5 cents per share has been proposed, bringing the full year&rsquo s dividend to 32.5 cents, up from FY2022&rsquo s 32.0 cents. Barring unforeseen circumstances, the annualised dividend will be 34.0 cents per share, an increase of 6.3%. The final quarter' s dividend will be paid out on Oct 20.

 

As at June 30, cash and cash equivalents stood at $777.3 million.

 

&ldquo Our financial performance continues to demonstrate the strength and resilience of our multi-asset business in a challenging macro environment. Global investors are increasingly turning to our trusted international marketplaces to invest and manage portfolio risk, with our revenue growth primarily driven by our derivatives business,&rdquo says CEO Loh Boon Chye.

 

&ldquo Our currencies and commodities franchises have grown substantially, achieving record volumes while we cemented our foothold as the preferred venue for Asian equity derivatives. With the positive momentum in our OTC FX business, we expect to achieve our goal of US$100 billion average daily volume by FY2025 or earlier,&rdquo he adds.

 

&ldquo While the unprecedented rapid tightening of monetary policies around the world has impacted capital-raising activities globally and in Singapore, we are optimistic that our pipeline of listings will come to market when conditions improve,&rdquo he continues.

 

In FY2024, Loh says that the group is looking to scale its multi-asset offerings globally through its &ldquo network, partnerships and geographical expansion of client coverage&rdquo .

 

&ldquo Asia is at the centre of global economic growth, and SGX Group is at the heart of international capital flows to this part of the world. We remain on track to achieve high-single-digit revenue growth, and are aiming to reward our shareholders with a mid-single-digit percentage increase in our dividend per share over the medium term,&rdquo he says.

 

RHB Bank Singapore analyst Shekhar Jaiswal has kept his &ldquo neutral&rdquo call on Singapore Exchange (SGX) after the exchange reported a &ldquo disappointing&rdquo set of market statistics for the FY2023 ended June 30.

 

Jaiswal&rsquo s report comes after SGX reported its market statistics for the month of June on July 12.

 

The exchange&rsquo s securities daily average value (SDAV) climbed 14% m-o-m and 2% y-o-y to $1.2 billion while total securities market turnover value rose 3% m-o-m to $23.7 billion.

 

For the FY2023, however, both securities turnover and SDAV &ldquo disappointed&rdquo Jaiswal&rsquo s expectations with declines of 14% and 13% on a y-o-y basis respectively. FY2023&rsquo s SDAV stood 2% lower than the analyst&rsquo s forecast.

 

SGX&rsquo s derivatives daily average volume (DDAV) also stood lower-than-expected with the FY2023&rsquo s DDAV coming in 4% below Jaiswal&rsquo s forecast. However, June&rsquo s DDAV surged by 15% m-o-m and remained flat y-o-y.

 

Following June&rsquo s statistics, Jaiswal has trimmed his earnings estimates for FY2023 to FY2025 by 3% to 4%.

 

&ldquo We still maintain our below-consensus forecasts, and reiterate our weak outlook for SGX&rsquo s cash equities business. Its forward P/E is at the historical mean, i.e. fairly valued,&rdquo he writes.

 

At its share price of $9.90 as at Jaiswal&rsquo s report on July 14, he notes that SGX&rsquo s shares have outperformed the benchmark Straits Times Index (STI) but the company &ldquo lacks near-term catalysts&rdquo .

 

&ldquo Amidst the relatively defensive nature of its earnings, year-to-date (ytd), SGX&rsquo s share price has outperformed the STI by 7%. However, this brings its forward P/E in line with its historical P/E mean of [around] 22x. While SGX&rsquo s non-cash equity businesses (ie the fixed income, currencies & commodities and equity derivatives business) are key long-term growth drivers, we continue to maintain our below-Street FY2024 earnings for now,&rdquo he says.

 

He adds: &ldquo SGX&rsquo s stock offers a dismal 3.4% forward dividend yield. We value the stock by applying a 22x P/E on its FY2024 earnings per share (EPS).&rdquo

 

Despite his lowered earnings estimates, Jaiswal has upped his target price marginally to $9.90 from $9.80 previously. His target price includes an environmental, social and governance (ESG) premium of 8% to its fair value estimate of $9.20 as SGX&rsquo s ESG score is four notches above the country median.

The Singapore Exchange S68 0.52% &rsquo s (SGX) latest set of monthly trading data continues to disappoint, says RHB Bank Singapore analyst Shekhar Jaiswal.

 

The bourse released its May monthly market statistics on June 13, which &ldquo continued to underwhelm&rdquo , according to Jaiswal.

 

In a June 15 note, Jaiswal is staying &ldquo neutral&rdquo on SGX with an unchanged target price of $9.80, which represents a 1% upside. The target price includes an 8% ESG premium to its $9.10 fair value, based on RHB&rsquo s proprietary methodology.

 

Both securities daily average value (SDAV) and derivatives daily average volume (DDAV) registered y-o-y declines in May.

 

Implied FY2023 SDAV and DDAV, based on data till May, are tracking 2% and 5% below RHB&rsquo s forecast. &ldquo We maintain our below-consensus forecasts, as we reiterate a weak outlook for its cash equities business. SGX&rsquo s forward P/E is close to its historical average, which is a fair valuation level,&rdquo says Jaiswal.

 

Securities volume extends decline

 

Securities volume, in particular, has declined for five straight months. The SDAV jumped 7% m-o-m in May as the Straits Times Index (STI) fell 3.4% MoM amidst a sharp sell down in bank stocks, especially DBS.

 

Despite the MoM improvement, the SDAV continued to register a YoY decline for five consecutive months as it fell 31% to $1,043 million.

 

The year-to-date (ytd) securities market turnover value and SDAV for FY2023 are tracking 15% below FY2022 numbers, while the implied FY2023 SDAV, based on data through May, is 2.2% below RHB&rsquo s estimate.

 

See also: Pullback in Venture Corp shares overdone, enhanced opportunity to accumulate: Citi

 

Singapore depository receipts (SDRs) for three Thai blue chips started trading on May 30 and Ever Glory United Holdings was listed on the Catalist board.

 

SGX noted that secondary funds raised grew 14% m-o-m, led by CapitaLand Ascendas REIT A17U -0.36% &rsquo s private placement of new units to fund its acquisitions. &ldquo We believe SGX could continue to see weakness in its cash equities business and maintain our FY2023 SDAV of $1,119 million, which remains below consensus.&rdquo

 

Derivatives volume follows suit

 

Meanwhile, DDAV has declined for four consecutive months. DDAV for May remains unchanged from the previous month at 0.93 million.

 

Total derivatives traded volume in May increased 16% m-o-m to 20.5 million contracts, down 8% YoY, as commodity derivatives and FX futures volumes saw strong growth.

 

Commodity derivatives volume rose 13% m-o-m and 55% y-o-y to 3.8 million contracts as demand for risk management grew.

 

Total FX futures traded volume on SGX FX grew 20% m-o-m to reach 2.9 million contracts, with market volatility ensuing in May as negotiations for a US debt ceiling deal intensified.

 

The ytd derivatives traded volume and DDAV for FY2023 are tracking 2% above the FY2022 numbers, while the implied FY2023 DDAV, based on data through May, is 4.9% below our estimate.

 

SGX lacks near-term catalysts and sports unexciting yields, says Jaiswal.

 

&ldquo Ytd, SGX&rsquo s share price has outperformed the STI by 9.4%. This brings its forward P/E closer to the historical average of 22x. While we see its non-cash equity businesses as key long-term growth drivers, we maintain our below street estimates for now.&rdquo

 

SGX&rsquo s stock offers a &ldquo dismal&rdquo 3.3% forward dividend yield, says Jaiswal. &ldquo We continue to value SGX by applying a 21x P/E to its FY2024 earnings per share (EPS).&rdquo

 

TOTAL securities turnover value on the Singapore Exchange : S68 +0.31% (SGX) rose 23 per cent on the month to reach S$23 billion in May from S$18.6 million the previous month.

 

On Tuesday (Jun 13), SGX noted that activity in the commodities and equities markets was &ldquo buoyant&rdquo versus April levels, while total derivatives traded volume in May rose 16 per cent month on month to 20.5 million contracts from 17.7 million earlier.

 

Commodity derivatives volumes registered a 13 per cent rise from April to 3.8 million contracts amid growing demand for risk management.

 

This was supported by a 9 per cent month-on-month increase in iron ore derivatives traded volumes to over 3.2 million contracts in May &ndash bringing the iron ore daily average volume on-screen to a new record as the raw material gains prominence as a &ldquo proxy for industrialising Asia&rdquo , said SGX. 

 

China&rsquo s reopening also led to increased activity from market participants, as evident in a 20 per cent month-on-month surge in the volume of SGX Sicom rubber futures.

 

Over on SGX FX, the total traded volume of forex futures grew 20 per cent on the month to reach 2.9 million contracts.

 

This was mainly driven by a 19 per cent rise in volumes for SGX USD/CNH Futures to 1.8 million contracts as economic data and monetary policy decisions led to increased hedging activities, said the bourse.

 

Within the equity derivatives market, the total traded equity index futures volume rose 16 per cent to 13.3 million contracts, against the backdrop of elevated risk management and trading activities.

 

The number of trading days was also higher in May, standing at 22 as opposed to 19 in April.

 

Despite broad-based activity across equity index futures, the performances of Asian equity markets were split in May. Japan and Taiwan equities were boosted by improving investor sentiment towards the semiconductor sector, whereas China&rsquo s equities market declined.

 

Overall, the securities daily average value was up 7 per cent from April to S$1 billion, with technology remaining the strongest sector in both global and Asia-Pacific stock markets so far this year.

 

Lion-OCBC Securities Hang Seng TECH ETF was the most traded Singapore-listed ETF in May.

 

SGX also noted that CapitaLand Ascendas Reit&rsquo s recent placement of new units to fund its acquisitions has helped to drive the raising of secondary funds up by 14 per cent month-on-month.