Bloomberg
│
Reuters
│
POEMS
SGX SP │ SGX SI │ SGX
Industry: Investment Services
Company Overview
SGX Ltd operates as an integrated securities and derivatives exchange in Singapore. Security products include equities, bonds, exchange traded funds, warrants, and ADRs. Derivatives products include futures and options, structured warrants, and extended settlements.
 SGX reported a decent set of results, 1Q14 net profit of

S$92.3 million, and Total revenue of S$184.1 million.
Net profit beat expectations on Higher Securities average clearing fee, Lower expenses, and Lower tax
 from S$4.0m write-back of prior year tax provisions.
Maintain “BUY” with TP of S$7.90, based on unchanged
PE multiple of 24X FY14 earnings.
What is the news?
SGX Ltd announced 1Q14 underlying net profit of S$92.3m, up 5.3% q-q, and 24.2% y-y. Total revenue increased
14.7% y-y, but was lower (9.0%) q-q to S$184.1m.
Management maintained guidance for FY14 Opex of
S$320m-S$330m, and Capex of S$35m-S$40m. Please refer to our Report for more information on trading activities.
Income Statement
(Extract) 1Q13 1Q14 y-y (%) Comments
(S$'mn)
Securities 60.3
69.0
14.5% Higher clearing fee of 3.2bps
Derivatives 44.5
51.7
16.2% Higher DDAV of 415k
Others 55.7
63.3
13.7%
Total Rev 160.5
184.1
14.7% Strong y-y, but weaker q-q
Opex 72.6
77.4
6.6% Lower than expected
Net Income 74.3
92.3
24.2% Beat expectations
Source: Company, PSR
How do we view this?
1Q14’s results beat our expectations on 1) Higher Securities average clearing fee of 3.2bps vs 2.7bps in 1Q13. This is due to the higher proportion of uncapped trades, contributed by both retail investors and institutional traders per management. While we think the average clearing fee of
3.2bps is not sustainable, we are encouraged by the higher retail participation. Average clearing fees may trend higher.
2) Lower operating expenses. However, management maintained guidance, with depreciation expected to increase once the Technology projects are put in use, and higher staff costs from increased headcounts. 3) Lower tax due to an S$4m tax write-back of prior year tax provisions.
Investment Actions?
We continue to be positive on SGX due to 1) Higher
Securities revenue forecast 2) Strong Derivatives revenue with constant new offerings, such as Thai and Philippines
Equity Index Futures to be introduced in coming quarters 3)
Attractive dividends, with potential for increase. We revise our forecast to reflect 1Q14 ’s earnings, and derive an unchanged TP of S$7.90. We maintain our “Buy” rating.
8.50
8.00
7.50
7.00
6.50
6.00
5.50
5.00
Phillip Securities Research Pte Ltd
18 October 2013
SGX Ltd
Rating
- Previous Rating
Target Price (SGD)
- Previous Target Price (SGD)
Closing Price (SGD)
Expected Capital Gains (%)
Expected Dividend Yield (%)
1
1
7.90
7.90
7.29
8.4%
4.1%
Buy
Buy
Expected Total Return (%)
Raw Beta (Past 2yrs w eekly data)
52 w eek range (SGD)
Closing Price in 52 w eek range
12.5%
1.00
Market Cap. (USD mn / SGD mn) 6285 / 7798
Enterprise Value (USD mn / SGD mn) 5684 / 7035
3M Average Daily T/O (mn) 1.6
6.5 - 7.85
Volume, mn
Major Shareholders
1. SEL Holdings Pte Ltd
2. Temasek Holdings Pte Ltd
3. Nomura Sec Singapore Pte Ltd
Key Financial Sum m ary
FYE
Revenue (SGD mn)
Net Profit, adj. (SGD mn)
EPS, adj. (SGD cents)
P/E (X),adj.
06/12
648
304
28.45
25.6
BVPS (SGD cents)
P/B (X)
DPS (SGD cents)
Div. Yield (%)
Source: Bloomberg, PSR est.
77.74
9.4
27.00
3.7%
*All multiples & yields based on current market price
Valuation Method
P/E
06/13
715
351
32.83
22.2
82.92
8.8
28.00
3.8%
Analyst
Ken Ang
Kenangw y@phillip.com.sg
Tel : (65) 6531 1793
0%
SGX SP EQUITY
50% 100%
STI rebased
(%)
23.4
5.6
5.0
06/14F 06/15F
741 776
355
33.21
22.0
380
35.55
20.5
88.41
8.2
30.00
4.1%
93.12
7.8
32.00
4.4%
20
18
16
14
12
10
8
6
4
2
0
MCI (P) 194/11/2012
Ref. No.: SG2013_0160 1 of 8

Singapore Exchange Ltd
Singapore Equities Research
18 October 2013
Fig 1. Securities Revenue
30
20
-
10
90
80
70
60
50
40
Fig 3. Market Data Revenue
10
9
8
7
9
8
Fig 5. Depository services
-
10
5
30
25
20
15
Fig 7. Other revenue
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Fig 9. Total revenue - Less Securities
Derivatives
Depository svc
Market data
Issuer services 140
120
100
80
60
40
20
0
Fig 2. Derivatives Revenue
-
30
20
10
70
60
50
40
Fig 4. Member services and connectivity
-
4
2
8
6
14
12
10
Fig 6. Issuer services
20
15
10
5
-
Fig 8. Total revenue
Securities
250 Depository svc
200
150
100
50
0
Derivatives Market data
Issuer services Other revenue
Member svc
Member svc
Other revenue
Fig 10. Total revenue - Less Securities and Derivatives
Market data
Issuer services
Member svc
Other revenue 80
70
60
50
40
30
20
10
0
Depository svc
2 of 8

Singapore Exchange Ltd
Singapore Equities Research
18 October 2013
Fig 11. Operating Revenue and NPAT
250 Ops rev ('000)
200
150
100
50
-
NPAT
Fig 13. 1/2 Yr Price Earnings Ratio (TTM)
28
27
26
25
24
23
22
21
20
Mean
SD + 1
Fig 12. 4Q13 to date SDAV ($ M ) vs Price
2,500 SDAV Price (RHS)
2,000
1,500
1,000
500
-
25.73
24.31
22.90
22.03
Fig 14. 5 yr Price Earnings Ratio (TTM)
40
35
SD + 1
30
25
20
15
10
Mean
SD - 1
29.21
24.83
8.50
8.25
8.00
7.75
7.50
7.25
7.00
6.75
3 of 8

Singapore Exchange Ltd
Singapore Equities Research
18 October 2013
FYE Jun
Valuation Ratios
P/E (X), adj.
P/B (X)
Dividend Yield (%)
Per share data (SGD)
EPS, reported (cents)
EPS, adj. (cents)
DPS (cents)
BVPS (cents)
Grow th & Margins (%)
Grow th
Revenue
Net Income, adj.
Margins
Net profit margin
Core profit magin
Key Ratios
ROE (%)
ROA (%)
Dividend Payout ratio
Cost to Income
Incom e Statem ent (SGD m n)
Securities
Derivatives
Market data
Member services and connectivity
Depository services
Issuer services
Other revenue
Operating revenue
Staff
Technology
Processing and royalties
Premises
Professional fees
Others
Operating expenses
Operating profit
Other gains/(losses)
Associates & JVs
Profit Before Tax
Taxation
Net Incom e, reported
Net Incom e, adj.
Source: PSR
FY11
25.0
9.5
3.7%
27.6
29.2
27.0
76.9
FY12
25.6
9.4
3.7%
27.3
28.5
27.0
77.7
FY13 FY14F FY15F
22.2
8.8
3.8%
31.4
32.8
28.0
82.9
22.0
8.2
4.1%
33.2
33.2
30.0
88.4
20.5
7.8
4.4%
35.6
35.6
32.0
93.1
3.3% -1.9% 10.4%
-1.9% -2.5% 15.5%
3.7%
1.2%
4.6%
7.0%
44.5% 44.6% 46.6% 47.6% 48.7%
47.1% 46.5% 48.7% 47.6% 48.7%
37.8% 36.7% 40.8% 38.7% 39.1%
18.9% 16.7% 19.9% 19.1% 19.2%
92.4% 94.9% 85.4% 90.6% 90.2%
43.5% 43.8% 42.1% 43.4% 42.1%
248
163
35
47
91
62
1
648
106
104
28
17
13
16
284
364
(6)
(3)
355
(64)
292
304
289
142
32
39
91
66
2
661
107
108
27
18
10
17
287
374
(15)
(3)
356
(61)
295
312
284
210
32
41
105
67
2
741
134
110
29
18
12
18
322
420
5
4
428
(73)
355
355
270
201
34
48
94
65
3
715
123
102
27
18
14
18
301
414
(10)
4
408
(72)
336
351
304
217
33
51
99
69
3
776
137
111
30
19
12
18
326
449
5
4
458
(78)
380
380
4 of 8

Singapore Exchange Ltd
Singapore Equities Research
18 October 2013
FYE Jun
Balance Sheet (SGD m n)
Cash and cash equivalents
Trade and other receivables
Others
Total current assets
Financial assets, available-for-sale
Property, plant and equipment
Softw are
Investments in joint venture
Investments in associated company
Deferred tax assets
Others
Total non-current assets
Total Assets
Trade and other payables
Taxation
Provisions
Others
Total current liabilities
Deferred tax liabilities
Total non-current liabilities
Total Liabilities
Share capital
Treasury shares
Derivatives clearing fund reserve
Securities clearing fund reserve
Retained profits
Proposed dividends
Others
Shareholder Equity
Cashflow Statem ents (SGD m n)
CFO
PBT
Adjustments
Cash from ops before WC changes
WC changes
Cash generated from ops
Taxes paid, net
Cashflow from ops
Cashflow from investm ents
Cashflow from financing
Net change in cash
CCE, end
Source: PSR
FY11 FY12 FY13 FY14F FY15F
796
70
7
0
874
16
16
890
423
(26)
34
25
205
160
13
833
698
779
35
1,512
66
26
119
0
6
217
1,729
0
0
982
66
8
0
1,056
12
12
1,068
420
(31)
34
25
201
160
15
824
693
947
31
1,671
73
30
118
4
5
230
1,901
0
0
845
108
7
0
961
14
14
974
429
(16)
34
25
274
193
8
947
782
890
60
1,732
51
17
100
0
29
198
1,929
0
0
783
92
7
1
884
15
15
898
426
(20)
34
25
241
171
11
889
763
757
60
1,580
51
24
112
0
27
215
1,794
0
0
884
108
7
0
1,000
14
14
1,013
429
(16)
34
25
311
206
8
998
853
931
60
1,844
51
175
2,019
0
0
12
78
0
33
356
44
399
5
404
(55)
349
(33)
(295)
20
545
355
53
408
(9)
399
(57)
342
(45)
(293)
5
548
408
56
464
6
470
(52)
419
(40)
(314)
65
613
428
72
500
(71)
429
(73)
356
(37)
(300)
19
632
458
46
504
(2)
502
(78)
423
(23)
(330)
71
703
5 of 8

11
10
9
8
7
6
5
Singapore Exchange Ltd
Singapore Equities Research
18 October 2013
Ratings History
Mar ket Pr ice
Tar get Pr ice
Source: Bloomberg, PSR
1
2
3
4
5
PSR Rating System
Total Returns
> +20%
Recom m endation Rating
Buy 1
+5% to +20%
-5% to +5%
-5% to -20%
< -20%
Rem arks
Accumulate
Neutral
Reduce
Sell
2
3
4
5
We do not base our recommendations entirely on the above quantitative return bands.
We consider qualitative factors like (but not limited to) a stock's risk rew ard profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation
6 of 8

Dennis Wu
Local Property denniswu@phillip.com.hk

PHILLIP RESEARCH STO CK SELECTION SYSTEMS
+5% to +20%upside from the curren t price
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation
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This publication shall not be reproduced in whole or in part, distributed or published by you for any purpose. Phillip Securities shall not be liable for any direct or consequential loss arising from any use of material contained in this publication.
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Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in this research should take into account existing public information, including any registered prospectus in respect of such security.
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Analyst Disclosure: Neither the analyst(s) preparing this report nor his associate has any financial interest in or serves as an officer of the listed corporation covered in this report.
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Information contained herein is based on sources that Phillip Securities (Hong Kong) Limited (“PSHK”) believed to be accurate. PSHK does not bear responsibility for any loss occasioned by reliance placed upon the contents hereof. PSHK (or its affiliates or employees) may have positions in relevant investment products. For details of different product's risks, please visit the Risk Disclosures Statement on http://www.phillip.com.hk.
© 2013 Phillip Securities (Hong Kong) Limited

Contact Information (Regional Member Companies)
SINGAPORE
Phillip Securities Pte Ltd
Raffles City Tower
250, North Bridge Road #06-00
Singapore 179101
Tel : (65) 6533 6001
Fax : (65) 6535 6631
Website: www.poems.com.sg
HONG KONG
Phillip Securities (HK) Ltd
Exchange Participant of the Stock Exchange of Hong Kong
11/F United Centre 95 Queensway
Hong Kong
Tel (852) 22776600
Fax (852) 28685307
Websites : www.phillip.com.hk
INDONESIA
PT Phillip Securities Indonesia
ANZ Tower Level 23B,
Jl Jend Sudirman Kav 33A
Jakarta 10220 – Indonesia
Tel (62-21) 57900800
Fax (62-21) 57900809
Website: www.phillip.co.id
THAILAND
Phillip Securities (Thailand) Public Co. Ltd
15th Floor, Vorawat Building,
849 Silom Road, Silom, Bangrak,
Bangkok 10500 Thailand
Tel (66-2) 6351700 / 22680999
Fax (66-2) 22680921
Website www.phillip.co.th
UNITED KINGDOM
King & Shaxson Capital Limited
6th Floor, Candlewick House,
120 Cannon Street,
London, EC4N 6AS
Tel (44-20) 7426 5950
Fax (44-20) 7626 1757
Website: www.kingandshaxson.com
AUSTRALIA
PhillipCapital Australia
Level 37, 530 Collins Street,
Melbourne, Victoria 3000, Australia
Tel (613) 96298380
Fax (613) 96148309
Website: www.phillipcapital.com.au
MALAYSIA
Phillip Capital Management Sdn Bhd
B-3-6 Block B Level 3 Megan Avenue II,
No. 12, Jalan Yap Kwan Seng, 50450
Kuala Lumpur
Tel (603) 21628841
Fax (603) 21665099
Website: www.poems.com.my
JAPAN
PhillipCapital Japan K.K.
Nagata-cho Bldg.,
8F, 2-4-3 Nagata-cho,
Chiyoda-ku, Tokyo 100-0014
Tel (81-3) 35953631
Fax (81-3) 35953630
Website: www.phillip.co.jp
CHINA
Phillip Financial Advisory (Shanghai) Co. Ltd
No 550 Yan An East Road,
Ocean Tower Unit 2318,
Postal code 200001
Tel (86-21) 51699200
Fax (86-21) 63512940
Website: www.phillip.com.cn
FRANCE
King & Shaxson Capital Limited
3rd Floor, 35 Rue de la Bienfaisance 75008
Paris France
Tel (33-1) 45633100
Fax (33-1) 45636017
Website: www.kingandshaxson.com
UNITED STATES
Phillip Futures Inc
141 W Jackson Blvd Ste 3050
The Chicago Board of Trade Building
Chicago, IL 60604 USA
Tel +1.312.356.9000
Fax +1.312.356.9005