Is Singapore Exchange Limited The Perfect Investment For You?

Singapore Exchange Limited (SGX) is Asia’s leading international exchange, facilitating exchanges of both local and global equities, derivatives, and fixed income securities among investors worldwide. Presently, SGX is worth S$ 7.8 billion and thus, is included as one of the 30 constituents of the Straits Times Index (STI). In this article, I’ll share 9 key things about SGX that you need to know before you invest. They are:

#1: Stock Symbol

Ticker Symbol: SGX: C68
Market Capitalization: S$ 7.8 billion (10 July 2018)

Share Price: S$ 7.33 (10 July 2018)

Industry: Finance

#2: The Business

SGX derives income from 3 main business segments:

1. Equities & Fixed Income
   SGX is a vertically integrated business where it offers listing, trading, clearing, settlement, and depository of securities and bonds. Today, a total of 40% and 75% of its listed companies and bonds are currently originated from outside of Singapore. In 2017, this segment has made S$ 404.5 million in revenues, contributing as much as 50% of its total revenues in the last financial year.

2. Derivatives
   SGX offers a full suite of derivative products across indices of equity markets across Asia, commodities, and currencies. It is presently the second source of income to SGX. In 2017, this segment has generated S$ 303.1 million in revenues, accounting for 38% of its total revenues.

3. Market Data & Connectivity
   This is the final and the smallest segment of SGX. In 2017, it brought in S$ 93.2 million in revenues and thus, accounting for the remaining 12% of total revenues to SGX.

#3: 10-Year Financial Results

In 2009, SGX has reported a sharp decline in both revenue and earnings due to the global financial crisis in that period.

Since then, SGX has reported continuous growth in revenue, up from S$ 595 million in 2009 to S$ 801 million in 2017. This growth was directly attributed to higher revenue achieved from its derivatives segment in the 9-Year period.

However, SGX has also reported a slight increment cost-to-income ratio and thus, resulting in lower profit margins during the period. It has slowed down its growth in profits. Overall, shareholders’ earnings have grown from S$ 306 million in 2009 to S$ 340 million in 2017.

SGX has achieved a 9-Year Return on Equity (ROE) average of 36.50% a year. It means, SGX has made, on average, S$ 36.50 in shareholders’ earnings from every S$ 100.00 in shareholders’ equity from 2009 to 2017.

Source: Annual Reports of SGX

Calculated based on Figures obtained from

Annual Reports of SGX

#4: Balance Sheet Strength

SGX is in itself a cash business and does not need to rely on debt or raising equity to finance its operations or to reward its shareholders with dividends. From 2008 to 2017, SGX has generated S$ 3.86 billion in cash flows from its operating activities and had spent:

1. S$ 549.1 million in capital expenditures.

2. S$ 175.6 million in buying of subsidiaries, associate & JV companies.

3. S$ 3.22 billion in dividend payments to shareholders.

As at 31 March 2018, SGX has reported to have no long-term borrowings and thus, have zero in gearing ratio. SGX has cash balance of S$ 521.6 million and a current ratio of 1.46. Suffice to say, SGX’s balance sheet is relatively healthy at this point of writing.

Source: Annual Reports of SGX

#5: P/E Ratio

The financial results presented above were up till 30 June 2017. Thus, I would first check its latest quarterly results to ensure that it has remained profitable over the last 12 months. I’ve discovered:

Source: Quarterly Reports of SGX

As I write, SGX is trading at S$ 7.33 a share. Thus, SGX’s current P/E Ratio is 21.50, lower than its 9-Year average of 23.96.

1. 9-Year Lowest P/E Ratio: 23.10 (2013)
2. 9-Year Highest P/E Ratio: 27.24 (2011)
3. 9-Year Average P/E Ratio: 23.96
4. Current P/E Ratio: 21.50

Calculated based on Figures obtained from

Quarterly & Annual Reports of SGX

#6: Dividend Yields

SGX has paid out 28.0 cents of dividends per share (DPS) from 2013 to 2017. At S$ 7.33 a share, its current dividend yields is 3.82%, which is similar to its 9-Year Average of 3.81%.

1. 9-Year Lowest Dividend Yield: 4.28% (2012)
2. 9-Year Highest Dividend Yield: 3.58% (2015)
3. 9-Year Average Dividend Yield: 3.81%
4. Current Dividend Yields: 3.82%

Calculated based on Figures

obtained from Annual Reports of SGX

#7: Stock Price Performance

SGX delivered stable profits and dividend payouts to its shareholders for the last 9 years. Its stock price has mimicked its financial results achieved during the period. It crashed in 2008, climbed to S$ 7.00 – 8.00 levels and has stayed there ever since. As such, flat profits resulted in flat growth in its stock price.

Source: Google Finance

#8: Investor Relations

For further enquiries or to request for additional investment information on Singapore Exchange Limited’s Investors Relation matters, you may contact:

Chin May Nah

Telephone: +65 6713 6327

Email: maynah.chin@sgx.com

Yee Kai Pin
Telephone: +65 6713 6455

Email: kaipin.yee@sgx.com

Website: http://investorrelations.sgx.com/

#9: Major Shareholders

As at 1 August 2017, Singapore Exchange Limited’s main shareholders and their shareholdings are as followed:

– SEL Holdings Pte Ltd: 23.36%

– Citibank Nominees Singapore Pte Ltd: 20.75%

– DBS Nominees (Private) Limited: 8.61%

– HSBC (Singapore) Nominees Pte Ltd: 6.25%

– DBSN Services Pte Ltd: 4.78%

Ian’s Notes:

So, is SGX at S$ 7.33 a good investment? Here, I’ll provide a list of key points for your reference:

Pluses:

1. The Only Stock Exchange in Singapore.

2. Good Reputation among International Investors.

3. Stable Revenues & Profits since 2009.

4. Zero Gearing Ratio. Cash Balance = S$ 521.6 million.

5. High & Stable Dividend Payout Ratio.

6. P/E Ratio = 21.50, lower than 9-Year Average of 23.96.

7. Dividend Yields = 3.82%. Paid on a quarterly basis.

Concerns:

1. Lacks Plans to Expand and Grow in the Future.

2. Lower Revenues from Equities & Fixed Income Segment, which had offset growth from its derivative segment.

3. Slow Economic Growth in Singapore.

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