Singapore Exchange (SGX) Annual Report 2011

Singapore Exchange (SGX) released its annual report for the year ended 30 June 2011 (FY 2011) recently. This report covered the period from 1 June 2010 to end 30 June 2011.

The operating environment for FY 2011 worsened in the second half of SGX’s financial year (i.e January to June 2011). Events impacting its operation include political unrest in the Middle East and North Africa (MENA) region, the earthquake in Japan, the Eurozone sovereign debt crisis and United States’ fiscal and economic growth problems. Investor confidence was affected resulting in securities daily trading value of $1.6 billion (FY 2010 $1.5 billion) and turnover velocity of 59% (FY 2010 66%).

Operating revenue increased by 3.1 per cent to $660 million. Net profit after tax decreased by 7.8 per cent to $295 million. Return on Equity (ROE) declined by 3.4 percentage points to 37.8 per cent. Earnings per share decreased by 8.3 per cent to 27.6 cents.  Out of this earnings, total dividend to be paid out would be 27 cents per share. This translates into 97.7 per cent of profit. The company has a policy of distributing no less than 80 per cent of profit as dividend. This financial year payout is the same in amount as compared to previous financial year. Because of lower profit this year, the dividend payout ratio was higher than the year before.

It is noted that SGX proposed merger with Australia Stock Exchange (ASX) fell through in the financial year and the transaction related costs associated with the merger amounted to $18.6 million. This amount dragged the net profit of SGX down in the current year. This is a one-time item and is not a recurring item.

In calculating dividend yield in relation to its share price, the yield based on end of financial year share price of $7.53 was 3.58 per cent.

The share is currently trading at $6.88 (cum dividend of 15 cents) and the dividend yield based on ex-dividend share price is 4.01 per cent.

Based on total shareholder return, SGX gave a return of 5.65 per cent. (7.9 per cent for FY2010)

Looking at the business in SGX, the exchange is the only one in Singapore. It will perform well when global economies recover in longer term and investors are increasingly trading both in securities and derivatives segments of its business.

Copyright © 2011, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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