SGX net profit to grow by 8.6% YoY

Driving growth in the bourse is the forex and commodity segment.

The Singapore Exchange (SGX) will likely post an 8.6% YoY growth in its net profit for FY22, mainly driven by the forex and commodity (FICC) segment, according to UOB Kay Hian.

In a report, the analyst said the FICC segment has been the core revenue growth driver for SGX for the year. 

With strong volume in USD/CNH and KRW/USD futures, FICC’s FY22 revenue from the currencies and commodities segment is also poised to increase by 23.2% YoY.

“Also, the consolidation of Maxxtrader acquisition in January 2022 is expected to boost forex trading and clearing revenue for 2HFY22,” UOB Kay Hian added.

The volume of commodity derivatives, on the other hand, was driven by the “outperformance from forward freight agreements, iron ore and petrochemical derivatives.”

“The introduction of dairy derivatives was also a welcome boost as trading volumes have grown steadily,” the analyst added.

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Apart from the FICC segment, UOB Kay Hian said strong results from the equity derivatives, and higher treasury income assumptions caused by more aggressive interest rate hikes will also contribute to the higher net profit and earnings of SGX.

In FY22, equity derivatives are expected to grow by 7%p8% YoY to $310.7m on the back of a higher average fee per contract ($1.34 in FY21 to $1.52 in FY22) and higher trading volumes (172.2m in FY21 to 180.7m contracts in FY22). 

“The increase in trading volumes was largely led by SGX’s FTSE China A50 volumes, which have remained robust and exceeded our expectations in the face of competition from HKEX,” the analyst commented.

With strong performances from several segments of the SGX, UOB kay Hian also predicted that the bourse will post a 3%-4% growth in its FY22-FY24 earnings.

It increased its FY22/FY23/FY24 earnings predictions to $449.7m (vs $431.1m), $504.7m (vs $486.3m) and $553.2m (vs $539.0m) respectively.