With a stunning 26.5% YoY increase in earnings and record-breaking numbers in the volumes of currencies and commodities derivatives, the Singapore Exchange Limited (SGX: S68) has shown that it is taking advantage of the elevated market volatility.
More commonly known as SGX, the stock exchange operator had a stellar FY2023.
Here is a deep dive into the specifics of SGX’s outstanding earnings for FY2023, and why this powerhouse of a financial market operator has all investors’ eyes on it.
1. Robust earnings that exceed expectations
Singapore Exchange reported earnings of S$570.9 million for FY2023, up 26.5% from FY2022.
Earnings per share (EPS) stood at 53.4 Singapore cents.
The strong earnings exceeded Bloomberg’s consensus by 3% for FY2023.
Meanwhile, revenue rose by 8.7% year-on-year (yoy) to reach S$1.19 billion, mainly driven by a 27.2% increase in derivatives revenue.
2. Derivatives revenue and EBITDA show strong growth
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 8.5% yoy to S$687.9 million.
This was driven by the strong growth in the derivatives business.
The Currencies and Commodities (C&C) derivative segment continues to be the main earnings catalyst for SGX amid the heightened market volatility.
The average fee per contract for equity, currency, and commodity derivatives rose to S$1.61 in FY2023.
Moreover, the over-the-counter (OTC) FX business maintained its robust growth, with average daily volumes increasing by 7% to US$75.8 billion in FY2023.
SGX’s impressive earnings were also supported by substantial treasury income spurred by rising interest rates.
This influx in treasury income led to an S$88.9 million increase in total treasury and other revenue.
3. Decrease in equity listing and trading volume
SGX saw eight new equity listings raising S$37.6 million in FY2023, down from 17 listings that raised S$1.9 billion in FY2022.
Meanwhile, secondary equity funds raised amounted to S$4.8 billion, down 15.8% yoy.
Daily average traded value also fell by 13.4% year-on-year, and total traded value declined by 14.1%.
4. Dividend increased by 6.3%
The proposed final quarterly dividend of 8.5 Singapore cents per share will bring the full year’s dividend per share (DPS) to 32.5 Singapore cents for FY2023, up from 32.0 Singapore cents in FY2022.
Barring unforeseen circumstances, the annualised dividend for FY2023 is expected to reach 34.0 Singapore cents per share, reflecting an increase of 6.3% from the previous year.
With the proposed increase, the dividend yield stands at 3.4%, offering a resilient and decent return for investors.
Shareholders will receive the final quarter’s dividend payout on 20 October.
The increase in dividend payout signals the company’s confidence in its financial performance and ongoing commitment to returning value to shareholders.
5. The resilience of SGX’s multi-asset business
SGX management has emphasised the resilience of its multi-asset business in a challenging macro environment and highlighted the growth in the company’s derivatives, currencies, and commodities franchises.
There is also an optimistic outlook of achieving a US$100 billion average daily volume in the OTC FX business by FY2025 or earlier.
The management also reiterated its commitment to achieving high-single-digit revenue growth and a mid-single-digit percentage increase in dividend per share over the medium term.
Resilient growth ahead despite challenging macro environment
In conclusion, SGX’s impressive financial performance in FY2023 showcases its resilience and ability to navigate a challenging macroeconomic environment.
The robust growth in earnings, underpinned by the strong performance of its derivatives business and rising treasury income, highlights the Group’s diversified revenue streams and adaptability in managing market volatility.
With increased dividends and the prospect of further growth in its currencies and commodities franchises, SGX is well-positioned to continue delivering robust financial results.
As the Group focuses on scaling its multi-asset offerings globally and capitalising on the positive momentum in its OTC FX business, investors can anticipate resilient growth ahead for SGX.
That’s despite the ongoing challenges in the broader macroeconomic landscape.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
