Mountain of evidence reveals SGX's lagging performance

15% profit fall is just one among many.

According to Nomura, SGX recorded a 15% y-y fall in 1QFY13 net earnings to S$74mn, accounting for 23% of our and consensus estimates of ~S$325mn for FY13F. A base level DPS of S$0.04 was declared.

Here's more from Nomura:

What does the result mean? On a y-y basis, trading volumes were lower for both the securities and derivatives market, and this had a knock-on impact on stable revenues through weaker depository services revenue.

However, this impact on stable revenue is largely already discounted in the stock price, in our view. On a positive note, SGX recorded a record-high S$17mn in collateral management income, which helped headline derivatives revenue to show positive growth on both a y-y and q-q basis.

Management continues to keep a tight lid on costs and maintained its S$30-35mn capex guidance. We believe SGX’s share price will still be guided by the daily average value traded (DVT) trend.

Stable revenue fell 10% y-y largely due to lower depository services which declined 22%. As trading activities slowed, the number of securities trades fell 12% y-y, resulting in lower securities settlement instructions. Similarly, the number of contracts processed decreased by 19% y-y.

A 2% decline y-y to S$73mn as depreciation was 17% lower y-y following the decommissioning of the Quest ST trading engine. Management is guiding for a FY13 cost base of S$295-305mn.

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