S$7.33-SGXL.SI
- At $7.33, SGX is at its lowest since Jun ’10 and 27.5% off it 2010 peak of $10.12 reached just before the announcement of the proposal to acquire/merge with ASX in Oct ’10.
- This could be attributed to a confluence of factors, both internal (s-chip scandals) and external (economic slowdown, Euro crisis).
- The resultant weak market sentiment caused recent IPOs (Hutchison Port) to perform dismally, as too trading volume.
- April and May (40 trading sessions) saw volume aggregating $60.29 bln, down 14.7% from the same period last year. The daily average of $1507.34 mln was also 10% lower than the Mar ’11 quarter’s $1679 mln ($104.1 bln total over 62 days), when SGX pos t ed $77.34 mln under lying prof i t, excluding the expenses related to the ASX exercise (reported profit was $67.0 mln).
- The first 9 trading days this month however showed a 7.7% increase y-o-y.
- Trading interest on GlobalQuote has significantly waned, totaling only $66.43 mln in May or $3.3 mln a day! Nov ’10, first full month of the board, saw $802 mln worth of business or $38 mln a day.
- None of the above is however expected to jeopardize SGX’s final dividend payout when result for ye Jun ’11 re released in early August. We expect unchanged 12 cents variable dividend, which has been the case for the last 2 consecutive fiscal years, on top of the 4 cents quarterly rate..
- Total for ye Jun ’11 would therefore be 28 cents a share costing just under $300 mln (vs 27 cents for ye Jun ’10), for a 3.8% yield. This should provide strong support for SGX’s share price.
- Short of new initiatives that could boost trading and hence help the company break out of the $70-80 mln quarterly profit as for the last 6 quarters, we do not expect SGX to be in a position to hike the base dividend rate as it did for 5 straight fiscal years till now.
- As such, HOLD remains appropriate.
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