CIMB on 17 Jan 2012
CIMB in a Jan 17 research report says: "SGX’s core net profit fell 19.9% y-o-y, and 14.3% q-o-q in a lacklustre quarter. 2Q12 core net profit ($65.4 million) is within our $62.9 million expectation and the street’s $61.4 million estimate. Revenues fell 14% y-o-y and 17% sequentially.
"Operating costs ($68.9 million) declined (-3.9% y-o-y, -7.6% q-o-q) after SGX scaled down staff and technological costs. SGX continued to introduce new ADR listings and derivatives products in the quarter. Efforts to increase retail participation are also underway, as are overall attempts to cut its reliance on securities clearing.
"We adjust our FY2012-2014 forecasts on cost assumption changes. We raise our DDM disc rate from 9.5% to 9.7% to account for valuation-compression risks, lowering our target price to $5.43. UNDERPERFORM."
Showing posts with label SGX. Show all posts
Showing posts with label SGX. Show all posts
January 18, 2012
January 17, 2012
SGX
Kim Eng on 17 Jan 2012
2Q11 results in line with expectations. Despite the significant decline in profitability, this set of results should be seen in the context of a very challenging quarter in terms of market conditions. We believe SGX’s efforts to diversify its income over the past 24 months is evident in this set of numbers, helping to cushion profitability.
Decent profitability despite challenging conditions. Net profit came in at S$65.4m, down 12% qoq and down 25% yoy. SDAV (Securities Daily Average trading Value) during this quarter was just S$1.1b, a 37% decline yoy and almost comparable to the S$0.9b low in Jan-Mar 2009. Securities revenue was down 35% yoy as a result. Other major sources of revenue such as derivatives and depository services, however, held steady or grew, which helped cushion the overall fall in revenue.
Proactive approach. Management shared that they will continue being proactive in improving trading volume. One area of focus will be to improve retail penetration, which at 10% compares unfavorably to Hong Kong’s 30% or Australia’s 20%. The use of more market makers to improve liquidity is also currently being studied.
SDAV bottoming out in our view. The current quarter’s numbers (EPS: SG6.1 cents) therefore gives us a good gauge of SGX’s base profitability. Even in a worst-case scenario where SDAV continues to drudge along at the same levels, one would still expect full-year EPS of SG 24.4 cents, almost all of which we expect SGX is able to pay out as dividends. This translates to a decent dividend yield of 4% at current prices.
Maintain Buy. We keep our estimates and SDAV assumptions largely unchanged (FY12F: S$1.4b, FY13F: S$1.5b), around the premise that market conditions will improve in the second half of this calendar year. Our target price of S$6.90 remains pegged at 25x FYJun12F PER, implying a dividend yield of 4%. Maintain Buy.
2Q11 results in line with expectations. Despite the significant decline in profitability, this set of results should be seen in the context of a very challenging quarter in terms of market conditions. We believe SGX’s efforts to diversify its income over the past 24 months is evident in this set of numbers, helping to cushion profitability.
Decent profitability despite challenging conditions. Net profit came in at S$65.4m, down 12% qoq and down 25% yoy. SDAV (Securities Daily Average trading Value) during this quarter was just S$1.1b, a 37% decline yoy and almost comparable to the S$0.9b low in Jan-Mar 2009. Securities revenue was down 35% yoy as a result. Other major sources of revenue such as derivatives and depository services, however, held steady or grew, which helped cushion the overall fall in revenue.
Proactive approach. Management shared that they will continue being proactive in improving trading volume. One area of focus will be to improve retail penetration, which at 10% compares unfavorably to Hong Kong’s 30% or Australia’s 20%. The use of more market makers to improve liquidity is also currently being studied.
SDAV bottoming out in our view. The current quarter’s numbers (EPS: SG6.1 cents) therefore gives us a good gauge of SGX’s base profitability. Even in a worst-case scenario where SDAV continues to drudge along at the same levels, one would still expect full-year EPS of SG 24.4 cents, almost all of which we expect SGX is able to pay out as dividends. This translates to a decent dividend yield of 4% at current prices.
Maintain Buy. We keep our estimates and SDAV assumptions largely unchanged (FY12F: S$1.4b, FY13F: S$1.5b), around the premise that market conditions will improve in the second half of this calendar year. Our target price of S$6.90 remains pegged at 25x FYJun12F PER, implying a dividend yield of 4%. Maintain Buy.
January 11, 2012
SGX
The Business Time on 11 Jan 2012
Analysts cut SGX estimates after disappointing December
By KENNETH LIM
ANALYSTS are trimming their forecasts for Singapore Exchange on the back of disappointing December trading volumes and macro concerns in the year ahead.
With SGX expected on Monday to report its second-quarter results, analysts are expecting revenue of $150 million to $167 million for the three months ended December 2011 and net profit of $63 million to $75 million, according to a poll by BT.
DMG & Partners yesterday downgraded SGX to sell and cut its price target to $5.40 from $6.20, citing lacklustre December data.
Other analysts were also downbeat. 'The problem is that 2Q's poor results might not be a one-off,' wrote CIMB analysts Kenneth Ng and Daniel Lau in a note.
'Market activity is lethargic. Against a backdrop of culled (investment banking) headcount, hedge fund closures, more can-kicking and intermittent fears of a banking contagion, investors cannot be expected to stampede back in a big way.'
The catalyst for some of the recent pessimism was December's trading volume data, which came in below expectations. Total securities market turnover dropped 40 per cent year on year in December to 15.1 billion shares, while the value of trades done was 41 per cent lower at $16.7 billion.
'Yes, the December quarter is seasonally slow but even then, (average daily value traded) was still 36 per cent lower than 2009/2010 levels, close to 2008 levels,' the CIMB analysts wrote.
CIMB has an 'underperform' rating on the stock with a 12-month price target of $5.86. SGX common stock closed at $6.16 on Tuesday.
Credit Suisse analyst Arjan van Veen, who cut his full-year SGX earnings estimate by 3 to 4 per cent after the December numbers, said SGX still offered a longer-term growth story and an Asian regional gateway.
'However, nearer term, SGX's fortunes are much more linked to current market volumes, which remain very weak,' Mr van Veen said.
He expected the exchange's historical 90 per cent dividend payout ratio to support valuations, but still rated the stock 'underperform' with a price target of $5.85.
Kim Eng analyst James Koh was the contrarian bull, maintaining a 'buy' recommendation with a 12-month target price of $6.78. Mr Koh pointed out that non-trading value-linked income could offer some upside.
Such income provide 'structural growth outside of the volatility of market trading conditions', Mr Koh wrote. 'One bright spot is derivatives volume, which has shown robust growth right up until last month.'
Taking a broader perspective, DMG analyst Leng Seng Choon recommended selling SGX and buying Hong Kong Exchange. Hong Kong's ability to attract international offerings with its huge hinterland and its abundance of Chinese yuan-denominated securities give it the edge over Singapore.
'SGX's efforts to drive liquidity is ongoing - we believe there will be some fruits, but investors are less convinced that it will have a significant impact within the next one to two years,' Mr Leng said.
December 22, 2011
SGX
Kim Eng Research 22 Dec
Wrapping up CY11. Singapore Exchange (SGX) will announce its 2QFY Jun12 results on 16 January 2012. We revise our securities daily average trading value (SDAV) assumptions going into CY12, which could turn out to be a slow year in terms of trading activities. We believe this period gives us an insight into likely SDAV trend going into the new year.
September-November period may be a good gauge. Given that the global equity market meltdown first started on 1 August, we think the SDAV of $1.3b for the three-month period from September to November (December is seasonally low) gives us a good gauge of SDAV, should 2012 turn out to be a quiet year as many now expect. SDAV for the August-December period was $1.38b.
Our target entry price of $5.85 is near. In our Market Strategy Report: 2012 Recovery Portfolio, we highlighted that our entry price for SGX is $5.85, based on a worst-case SDAV of $1.25b and an implied dividend yield of more than 4%. Even in this scenario, we expect EPS of $0.235 and free cash flow of $0.28 per share, which should form some support for the share price.
Non-SDAV income continues to be strong. We expect income support from non-SDAV sources, where we believe there is structural growth outside of the volatility of market trading conditions. For example, derivatives volume is one bright spot which continued to show strong growth even up till November 2011, and we estimate could make up a record high 27% of group income for FY Jun12.
Maintain Buy. We lower our SDAV assumption for FY Jun12 to $1.4b to reflect likely market conditions for the next year. Our target price of $6.78 remains pegged at 25x FY Jun12F, also implying a yield of 4%. SGX is currently trading at 7.9x FY Jun12F P/BV, below its historical mean of 9x (trough of 5x in 2009). Our profit estimate for 2QFY Jun12 is $75m, which would be flat on a YoY basis but down 15% on a QoQ basis.
Wrapping up CY11. Singapore Exchange (SGX) will announce its 2QFY Jun12 results on 16 January 2012. We revise our securities daily average trading value (SDAV) assumptions going into CY12, which could turn out to be a slow year in terms of trading activities. We believe this period gives us an insight into likely SDAV trend going into the new year.
September-November period may be a good gauge. Given that the global equity market meltdown first started on 1 August, we think the SDAV of $1.3b for the three-month period from September to November (December is seasonally low) gives us a good gauge of SDAV, should 2012 turn out to be a quiet year as many now expect. SDAV for the August-December period was $1.38b.
Our target entry price of $5.85 is near. In our Market Strategy Report: 2012 Recovery Portfolio, we highlighted that our entry price for SGX is $5.85, based on a worst-case SDAV of $1.25b and an implied dividend yield of more than 4%. Even in this scenario, we expect EPS of $0.235 and free cash flow of $0.28 per share, which should form some support for the share price.
Non-SDAV income continues to be strong. We expect income support from non-SDAV sources, where we believe there is structural growth outside of the volatility of market trading conditions. For example, derivatives volume is one bright spot which continued to show strong growth even up till November 2011, and we estimate could make up a record high 27% of group income for FY Jun12.
Maintain Buy. We lower our SDAV assumption for FY Jun12 to $1.4b to reflect likely market conditions for the next year. Our target price of $6.78 remains pegged at 25x FY Jun12F, also implying a yield of 4%. SGX is currently trading at 7.9x FY Jun12F P/BV, below its historical mean of 9x (trough of 5x in 2009). Our profit estimate for 2QFY Jun12 is $75m, which would be flat on a YoY basis but down 15% on a QoQ basis.
Subscribe to:
Posts (Atom)