SGX's Q4 profit falls 12% on weak securities markets

THERE was no element of surprise when Singapore Exchange announced yesterday that net profit for the final quarter slipped again, for the third straight quarter.

Net earnings for the fourth quarter ended June 30 slipped 12 per cent to S$77.42 million while revenue fell 15 per cent to S$172.6 million.

The poorer performance capped a financial year marked by crimped securities market activity amid record low volatility, curbed speculator appetite after last year's penny stock crash and investors exiting Asia into developed markets.

Securities revenue fell sharply by 32 per cent to S$53 million on lower revenue from all segments - clearing, access and collateral management, membership and other revenue - led by a 30 per cent decline in securities daily average traded value (SDAV) to S$1.1 billion over the quarter from a year ago.

Earnings per share stood at 7.2 Singapore cents, down from 8.2 Singapore cents a year ago. The company has proposed a final dividend of 16 Singapore cents per share, in line with the payout a year ago. Total dividend payout for the year adds up to 28 Singapore cents per share, the same as the previous year.

For the full year, SGX, Asia's third-largest bourse by market value, earned S$320.4 million, lower by 5 per cent from a year ago on the back of a 4 per cent drop in revenue to S$686.9 million.

"We had a tough year but despite the toughness, we were able to grow our business on all segments but securities," said SGX chief executive Magnus Bocker at a results briefing yesterday.

Securities revenue slumped 18 per cent while SDAV and total traded value decreased 23 per cent and 22 per cent to S$1.14 billion and S$286.3 billion respectively over the 252 trading days in the fiscal year.

Apart from low volatility, the SGX noted that since October 2013 - when many penny stocks were hammered, leaving investors saddled with massive losses - short-term speculative interest has fallen, leading to a drop of S$200 million in the SDAV for lower priced stocks.

"A year like this is very muted with low volatility, funds flowing out of Asia and continuous resistance by both institutional and retail investors to come to the market. If that persists, I don't think we'll see a big pick-up in volumes (next year)," said Mr Bocker. However, he added he was confident the securities market would recover despite a tough year and investors would return.

He pointed out that despite the local bourse's key Straits Times Index having gained significant ground over this period, the rise was not supported by volumes as a strong market would typically be, but was instead hampered by market vagaries.

The year saw 34 new listings which raised S$4.8 billion versus 30 listings raising S$8.1 billion a year ago. Total market capitalisation grew 6 per cent to S$1 trillion as at end-June this year.

SGX's derivatives business continued to be the rosy half of the story, with revenue rising 3 per cent to S$208.7 million with total volumes up 3 per cent at 104.3 million contracts, fuelled by record volumes in the China A50, India Nifty and iron ore products over the period. On the other hand, volumes of the Nikkei 225 futures normalised after a record year in 2013.

Mr Bocker said that the exchange would launch electricity and gold futures and expand its suite of FX futures over the next few quarters.

In the stock market yesterday, SGX shares finished one cent lower at S$7.06.