LME-SGX merger to float soon despite denials

A cross-trading collaboration could be an answer to longer-term earnings expansion as net profit in 4QFY12 may slump 15%.

Here's more from CIMB:

What Happened
SGX will be releasing its FY12 results on 27 July. We expect a 4QFY12 net profit of S$66.1m (-15% qoq). We think that earnings will be dragged down by sequentially-weaker securities Average Daily Value Traded (ADVT, -20% qoq). Average turnover velocity, a measure of investor interest, fell to 45% in 4Q12 from 57% in 3Q12.

We could see some earnings support from healthy derivatives volume traded (+5% qoq), with the China A50 Index futures showing a notable increase in volume traded (+15% qoq). Securities clearing ratescould also improve marginally with increased retail participation (proportion of contract values: <S$1.5m – 61%).

What We Think
The market has long anticipated a gloomy near-term outlook for the company. Therefore we think that focus at the analysts’ briefing will be on details of efforts to lay the building blocks for longer-term earnings expansion, such as raising trading liquidity and investor interest,attracting quality listings, and the LME-SGX cross-trading collaboration. We think that questions relating to a possible LME-SGX merger will be floated too, despite official denials recently dispelling the market rumours.