In Singapore market, it will be really a herculean task to find a company which has given consistently 34-40% return of equity (RoE) since past 10 years. But Singapore Exchange limited is one of such companies, which has given such consistent returns.
Below is SGX ltd’s (SGX: S68) historical Return of Equity (RoE) –
But during the last 10 years, SGX has just turned more stronger than it used to be 10 years ago. It has no distant competitors in Singapore. But SGX’s ambition is becoming Asia-pacific leader. In more sophisticated financial parlance, SGX has been consistently creating a sort of an “economic moat” in stock exchange business, this “economic moat” is hard to compete for its potential rivals in Asia Pacific regions.
During the last 5 years, SGX has consistently reported growth in its top-line as well as its bottom-line in all these years (except 2006-17; it reported a minor drop in revenue and profit after tax).
Its revenue grew from S$818M in 2016 to S$1052M in 2020. It translates into almost 5.2% compound annual growth rate (CAGR).
Its profit after tax grew from S$349M in 2016 to S$472M in 2020. It translates into almost 6.22% compound annual growth rate (CAGR).
Its dividend pay-out ratio has been consistently near to 75% of its total earnings per share. i.e. it distributed on-the-average 75% of its total earning per share and retained just around 25% of its earnings-
|Year||Dividend Paid per share (S$)||retention rate (%)||Payout ratio (%)|
If you want to know about the recent quarterly performance of SGX then I can share the details about 1H FY2021 –
It has reported a decent growth in almost segments in which it operates currently. This is a significant achievement given its dissociation from MSCI Inc.
FYI, MSCI Inc. announced that it will move its range of derivatives and options products from Singapore to Hong Kong. The contract for the license agreement SGX had with MSCI Inc. will not be renewed beyond February 202.
So, in order to compensate for that loss, SGX has started some new partnership with FTSE index. Singapore Exchange (SGX) has shown some agility and reduced its pact with MSCI months earlier than expected, citing market uncertainty into year-end to speed up delisting the largest derivatives product it has in partnership with the index provider.
SGX will migrate all open positions in the MSCI Taiwan Index futures to its newly launched FTSE contracts on Oct 30 and the MSCI product will then be suspended.
Below is SGX’s sectoral level revenue break-down –
Final thoughts –
Being the market leader in its business segment, SGX has pricing power to set the market data fee, trading commission/fee and other charges. It can also pass on any other costs, directly to its end users without much deliberations.
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