Singapore Exchange Annual Report 2012

Singapore Exchange (SGX) released its annual report for the year ended 30 June 2012 (FY 2012) recently. This report covered the period from 1 July 2011 to end 30 June 2012.

SGX’s performance for current financial year was worse than the year before.

Operating revenue fell 2.0 per cent to $648 million. (Last Year: $661 million). Net profit after tax decreased by 1.0 per cent to $292 million (LY: $295 million). This year’s performance did not have a one-time charge of transaction related costs associated with failed merger with Australia Stock Exchange amounting to $18.6 million. Yet the net profit for current year was still lower than the year before.

Return on Equity (ROE) declined by 0.8 percentage point to 35.2 per cent (LY: 36.0%). Earnings per share decreased by 1.0 per cent to 27.3 cents (LY: 27.6 cents).  Out of this earnings, total dividend to be paid out remained the same as previous year at 27 cents per share. This translates into 98.8 per cent of profit (LY: 97.7%).

The company has a policy of distributing no less than 80 per cent of profit as dividend. For the new financial year FY2013, SGX intends to pay base dividend of 4 cents for first three quarters (total 12 cents) plus 16 cents as final dividend. Total dividend is minimum 28 cents or higher if net profit for new financial year shoot up suddenly and 80% dividend payout translates to more than 28 cents. This dividend policy statement is first of its kind for me. I have not seen such specific dividend policy statement from other listed companies.

The operating environment for FY 2012 was still challenging. Investor confidence was affected resulting in securities daily trading value of $1.32 billion (LY: $1.62 billion) and turnover velocity of 53% (LY: 59%). Securities trading was only 38% of total revenue (LY: 44%). However, revenue contribution of derivative business rose to 26% from 21% previously.

In calculating dividend yield in relation to its share price, the yield based on end of financial year share price of $6.31 was 4.27% (LY: share price $7.53; dividend yield 3.58 per cent).

Based on total shareholder return, return was negative 12.6 per cent for current year (LY: positive 5.7 per cent). Long-term shareholders lost out with this stock for the year. Net asset per share as end of financial year was 78 cents (LY: 77.2 cents). On net asset per share basis, shareholders punished SGX with low year-end share price relative to net asset per share in the current year compared with previous year. I will continue to hold on to this stock for upside potential in the longer term.

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 © 2012, 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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