SINGAPORE (Apr 23): Singapore Exchange reported 21% y-o-y higher 3Q18 earnings of $100 million.

This comes as derivatives revenue surged 20% and contributed 41% of total revenue as the FTSE China A50 Index futures recording a 40% jump.

In 3Q18, SGX's revenue rose by a respectable 10% y-o-y, even as operating expenses increased by a milder 5% y-o-y. Its PBT margin of 54.3% was 4.2 ppts wider y-o-y.

During the quarter, securities average daily value (SADV) rose 17% higher to $1.45 billion.

The average equities clearing fee was 2.87bps, reflecting a decrease from 3Q17’s 2.93bps due to a higher proportion of trading by market makers and liquidity providers. Consequently, securities trading and clearing fees rose by a milder 12% y-o-y.

In a Monday report, RHB says SGX's 9M18 earnings of $280 million represented 75% of its FY18 forecast of $373 million.

Management expects more IPO listings in FY18 compared to FY17, which could help drive trading volumes, according to RHB.

"We forecast a FY18 earnings growth of 9.7% y-0-y. We use a target 24 times FY19 earnings or 1SD above the three-year mean of 22.2 times, which yields a target price of $9.00. Our target price is supported by a DCF-derived fair value of $8.85," says analyst Leng Seng Choon. RHB has a "buy" on SGX.

The research house's sensitivity analysis shows that, even if FY19 SADV was lower by 20% at $1.11 billion, the stock should trade at around $7.84.

As management has declared an unchanged interim dividend of 5 cents each, SGX offers an attractive FY18 dividend yield of 4.1% which is higher than the Singapore sovereign 10-year bond yield of 2.37%, says RHB.

Meanwhile, Phillip Capital says SGX's 3Q18 PATMI beat its estimates by 11% with revenue of $222 million is the highest since listing.

However, it was securities revenue that exceeded its expectations, says its research team. Derivatives business drove revenue growth with volumes surging by 34% y-o-y. FX derivatives enjoyed a stellar 89% spike in volumes.

SGX will launch new Indian equity derivative products by June 18, linked to a so-called “publicly available reference price”.

"Maintain "buy". Our target price raised to $9.20 from $8.89 previously, in line with the increase in our FY18 earnings by 4%," says Phillip.

As at 11.52am, shares in SGX are up 17 cents at $7.73.