Cost containment key to stop SGX’s earnings bleed: analysts

It’s operating margin has declined to 50% this year.

Expenses are quickly overtaking Singapore Exchange’s revenue, and analysts are saying cost containment is now necessary for the local bourse to maintain a stable profit.

According to a report by OCBC, SGX is guiding for FY17 operating expenses of S$420m-S$430m (up from the guided range of S$415m-S$425m in FY16) and with technology-related capital expenses at S$65m-S$70m (versus the previous year of S$70m-S$75m).

Additionally, the global environment remains challenging for equities, meaning there could be limited upside for revenue expansion.

“Against this backdrop, management shared that they will be “disciplined in expenditure” and focus on expansion and additional staffs in areas that they are developing,” OCBC said.

“The soft market outlook and cautious trading environment are key reasons for the cut in our FY17 earnings estimate,” OCBC added.