Revenue from equities and fixed income increased 2% y-o-y to $99.7 million, accounting for 49% of SGX’s total revenue, while derivatives revenue rose 14% to $80.6 million, contributing 39% of the total revenue and market data and connectivity revenue increased 10% to $24.2 million contributing to 12% of the total revenue.
The management has declared a 5 cent divided this quarter, payable on Nov 9.
See: SGX posts 9% rise in 1Q earnings to $90.7 mil
Although SGX posted positive results for 1Q18, OCBC is maintaining its “hold” call on SGX with a target price of $7.87.
In a Thursday report, analyst Carmen Lee says, “While most leading indices are up for the year, we expect higher valuations to rein in some of the buying interest especially as we head towards the lull months in late November to December.”
The analyst is keeping the forecast largely intact for FY18 and making some upwards revision to FY19.
In addition, SGX’s management is guiding for FY18 operating expense of $425 million to $435 million and technology-related capital expenditure of between $60-65 million.
The management is positive about its strategy and outlook, also guiding more initial public offering (IPO) listings in the coming quarter while lining up to launch more new products.
SGX recently launched the Daily Leverage Certificate and is cited as one of the new products with good trading activity.
Meanwhile, the exchange is planning to collaborate with other exchanges and has recently set up office in Chicago.
See: SGX and Nasdaq team up to let companies list shares on both markets
See also: SGX America launched with opening of first office in Chicago
In like manner, Credit Suisse is also keeping its “neutral” rating on SGX with a target price of $7.60.
Despite the management expecting IPO pipeline to remain healthy going into the next quarter, turnover is expected to be slow during that period, while the lack of any major catalysts may cap the stock price performance in the near term.
In a Thursday report, analyst Rikin Shah says, “Management believes that if the market remains buoyant, there could be another 10 to 12 IPOs in the pipeline by the end of 2017. This could push the total number of IPOs to the ‘high 20s’ from the 18 already YTD.”
On the other hand, Phillip Capital is recommending investors to “accumulate” on SGX with a lowered target price of $8.31.
In a Thursday report, analyst Jeremy Teong says that strong growth is expected in SGX’s ETFs, DLC and warrants traded volume as well as stronger equities traded volume, especially in property and finance counters.
“We expect stronger traction for existing derivatives products as well as higher traded volumes from new product launches in FY18,” says Teong.
The analyst is also upbeat on SGX’s China A50 Equity Index Futures in its derivatives portfolio as well as the USD/CNG Futures following the relaxation of rules in China relating to Equity Index Futures trading earlier this year.
However, the lower target price is attributed to the exchange’s weak revenue growth outlook in Post Trade Service in FY18e.
Hence, revenue expectations were lowered for securities clearing fee due to the higher contribution from low margin products.
As at 10.20am, shares in SGX are trading 4 cents higher at $7.65 or 23.8 times FY17 earnings.
