Singapore Exchange Limited

Good morning, ladies and gentlemen, and to also those who are watching this session via webcast. Thank you for joining us today to discuss SJX FY2024 financial results. The session today will begin with a presentation of our financial highlights by Ng Yau Lung, our CFO, followed by a business update by Lo Bun Chai, our CEO. There will also be time for questions and answers thereafter, but please be reminded, for those of you who are asking questions, do identify yourself. So it is now my pleasure to invite Yao Lung on stage to deliver our financial highlights. Yao Lung.

Well, very good morning, and thank you for joining us on the eve of National Day. So, FY24 performance. I would say it was stable in both revenue and earnings growth. So group revenue was up 3.1%, to about $1.23 billion, driven by the strong growth of currencies and commodities. On an adjusted basis, our expenses increased 2.5% to $604 million, while group earnings increased 4.5% to $526 million. Our operating profit margins and earnings margins improved 0.3 percentage points and 0.6 percentage points, respectively. Now, let me run through the details of our financial performance. So, as mentioned earlier, revenue growth was mainly driven by currencies and commodities, which collectively grew 23% year-on-year. Our derivatives franchise, which is the chart on the left, comprising equities, commodities, and currencies, futures, and options, and the associated treasury income, or TI, is about 45% of total revenue. The revenue from our derivatives suite grew about $12 million, or 2%, driven by an 8% growth in volumes. The lower revenue growth is in part due to how we account for the GiveConnect fee arrangements. Royalty used to be paid in FY23 and it was accounted for as an expense item. Subsequently, we replace it with a fee arrangement, which is netted off against the trading and clearing revenue. TI or treasury income was marginally lower against a year ago. If we exclude that, our group revenue growth would have been slightly higher at 3.6%. Contributing to the higher derivatives growth, was clearly the growth in our trading and clearing revenue. So we saw currency futures DAV grew 35%. Commodities DAV also increased by 50% given our efforts in broadening participation in our INL contracts. Equity derivatives declined in terms of DAV 7%, mainly due to the lower nifty volumes as we migrated our members and clients to the GiveConnect. If we exclude the nifty volumes, the DAV decline would have been 3%. Now, OTCFX business, we saw healthy growth. ADV increased 47%. US dollars, $111 billion, which exceeded our target of $100 billion early. The ADV increase was from higher swaps activities. We saw financial institutions managing their interest rate risk, enhancing their capital efficiency, even the volatility in the markets. Revenue-wise, OTCFX grew 22%. It's now about $92 million. It's 7.5% to our group revenue compared to 6.3% a year ago. Capital-raising cash equity markets activity-wise remain subdued as economics and uncertainty impacted investors' appetite for new investments. The SDAV declined 4% to $1.06 billion on a year-on-year basis. Now, just a reconciliation between our reported earnings, which is almost $600 million, to our adjusted earnings, $526 million, What you see in the middle is a bunch of non-cash adjustments which I will highlight or elaborate. So first on the left, we saw a net fair value gain of just over $100 million, mainly from our investment in a private equity fund managed by 7Rich, which holds one single asset, trading technology. So reflecting the continued strong operating performance of TT, our investment in this fund was revalued outwards by $92 million this year. Previously, in the previous FY, the investment was revalued outwards by $40 million. And this fair value adjustment flows through our P&L, given its accounting classification. Now second, the performance of scientific beta remains subdued relative to our expectations. Hence, we wrote back the accounting gain in our forward liability, which relates to a put and call option with ADAC to acquire the 7% stake, which we don't own. We also took an impairment charge of almost $9 million this year, relating to the purchase intangible assets in scientific beta relating to know-how and customers. Third, there were other impairment losses, including a $10 million impairment for the cessation of operations of our fixed income trading platform, or Bonpro. Now, our fixed income focus is on short-term interest rates right now, as we launch the futures to support our customers' demand for more risk management tools in this area. So we launched the futures linked to Sora, which is the Singapore overnight rate average, and Tona, Tokyo overnight rate average rate, just recently. Finally, we also set aside $8 million as a provision to fund a $10 million initiative to improve the vibrancy of our securities market. The monies will be channeled to our industry partners for initiatives that can help and improve market vibrancy. This could include areas like growing distribution channels for investor outreach, new services to enhance or engage investors and support the expansion of our product shelf, and regional connectivity. So this money set aside will be over and above our ongoing BAU investments in the securities market. Now back to revenue across our four operating segments, which appears on our financial statements. So starting with FICC on the left, it now accounts for 26% of our total revenue. So it's comparable to the revenue contribution from both equity derivatives and equities cash. So I mentioned two years ago that we expect this segment to grow in terms of revenue at a mid-teens percentage range over the medium term. It has in fact grown more than 20% per annum in the last three years. So volume growth for all our key asset classes in this segment was very strong. As I mentioned, Currency Futures DAV was 35% growth. OTCFX was 47%. And Iron Ore grew 52% in terms of DAV growth. Now moving on to equity derivatives, revenue decreased by 8%. It still accounts for about 27% of total group revenue. And the decline in the TNC, or Trading and Clearing Revenue, was driven, as I said, by a decline in the derivatives volume from GiveNifty and also our Nikkei Futures, partially offset by higher volumes in our Taiwan Index Futures contract. And again, if we exclude Nifty, our Trading and Clearing Revenues would have increased 0.5%. On a pro forma light-for-light basis, our average fee for all our derivatives suite declined marginally from $1.56 in FY23 to $1.54. Again, this relates to the accounting adjustments I mentioned earlier. And so actually what you are getting is a light-for-light comparison. As for the cash market, revenue was down 2% due to a 4% decline in our securities traded volume. It continues to contribute 27% of our group revenue. But the decline was primarily driven by lower trading activity in the REITs and the small and mid-cap stock segments. Overall, securities average clearing fee remained comparable at 2.49 basis points. Our platform revenue was up 6%. due to growth across market data, connectivity, index, edge, and others. This segment is about 20% of our total revenue. So we saw growth from a combination of volume, i.e. onboarding new subscribers of Colo and market data, and also repricing of these services. Now, I wanted to share with you on a half-on-half basis. Usually, we just look at it from a year-on-year basis. So, you can see there's actually strong double-digit percentage momentum in volumes across our major asset classes. And that has sustained in July as well. We released the monthly statistics today together to results. So, on the left, the derivatives business saw a DAV of 1.17 million contracts. in the second half of this financial year. It is actually the highest half-year DAV since our listing. We saw investors managing their risk exposures to Asia, including China, given a more volatile geopolitical and macro environment. So across derivatives, the DAV growth was in the low to mid teens, or in the high teens percentage. So in the equities DAV, it was up 11%, commodities 15%, and the exchange-traded currency futures was up 17%. And then when we look at the OTCFX, the ADV grew 23%. And so for second half, it was $123 billion. Cash equities, likewise, SDAV grew 21% to about $1.16 billion. As I said, in July, we saw continued momentum in these numbers. Now, from FY 2025, we will implement an accounting change. So that doesn't affect what you see in terms of the fundamental or the underlying earnings. And this is how we look, and it's more aligned with how management looks at the underlying economics of our transaction businesses, especially in derivatives. So going forth, transaction-based expenses, or what we classify as processing and royalties, will be moved from the expenses side to be netted off against operating revenue to derive net revenue. I think you can see the pro forma on the left using FY24 numbers. This will actually facilitate better comparability with major global derivatives exchanges as they also adopt a similar accounting practice. So with this change, the calculation of the securities and derivatives average fee per contract will also change. It will now reference net revenue instead of operating revenue, and naturally that will be lower. So again, I've given you an example of the FY24 numbers. So the average clearing fee is $1.54, and just by virtue of this accounting change, the fee will be at $1.31. But nothing else changes. In fact, every line item still appears where you will see it and you can form your own conclusion. So again, I emphasize this is how it reflects how we look at the net revenue after the royalties. On the expenses side, adjusted expenses was up 2.5%. It was lower than what I guided initially. So really increased from higher staff costs. Again, we have the merit increment and we also had a bit of an increase in our headcount, around 4% to support the growth of our OTCFX business. Technology-wise, it was up 3% in terms of expenses from higher system maintenance. Royalties declined 5%, but that's mainly due to the absence of gift nifty royalties. We actually saw higher iron ore royalties in this segment. The adjusted expenses is about 3% lower than reported expenses because it excludes two items. One, the amortization of purchased intangibles. This is what we have been doing since we introduced this metric. And then the other one, which I've mentioned, the $8 million that we set aside to fund the securities market for our partners. Now, looking at forward to FY25, in the near term, we do expect the expenses to grow 2% to 4%. I've just mentioned about the accounting change. So when we look at expenses-wise, this will exclude transaction-based expenses, which is in part volume-driven. So I think that's a better reflection of our forecast of our expense base. And we'll manage this expense base by growing headcount at a more measured pace. and of course improving operational efficiency and realising savings from the completion of the migration of our OTCFX data centre. Going out a little bit longer over the medium term, I do expect that the organic expense growth to remain in the low to mid single digit percentage range. As for CapEx, we incurred $66 million in FY24. I'm guiding to a range of $70 to $75 million in FY25. as we invest in the modernization of our security system and also infrastructure upgrade. I've mentioned quite a few times that our CapEx would appear to be on uptrend, given the typical refresh cycle for major systems. We'll continue to invest in the modernization of our exchange trading and clearing platforms and also our data center. But we expect CapEx over a cycle to remain below the historical average of 7% of group revenues. Balance sheet remains strong, healthy leverage ratios. If you look at the charts on the right and left, interest coverage ratio, not an issue. We have, in fact, reduced our gross debt by about $50 million when we refinanced our convertible bond, which matured in March 2024, and we issued a SingDollar corporate bond. And as a result of the refinancing, we do not have any debt maturing until FY2027. The Board of Directors has proposed a final quarterly dividend of $0.09 per share. So if it is approved at our upcoming AGM in October, this would bring the total dividends for FY24 to $0.345 per share. So this 0.5% increase in quarterly dividend from $0.085 to $0.09 represents an annualised increase of almost 6%. And this is in line with our stated aim to increase dividends per share by mid-single-digit percentage growth in the medium term, subject to earnings growth. Now with that, let me hand over to Boon Chye, our CEO, who will deliver the business update.

Good morning again. Thank you for joining us. As you heard from Yao Lung, overall, the group delivered a set of results that demonstrates the resilience of our business. As you can see from this slide, the two pie chart, our multi-asset strategy has yielded positive results over the years. The diversified revenue profile of business today is the result of our strategic growth initiatives within the currencies and commodity space, combined with the resilience of our equities business. Back in FY 2016, when we first started building up various asset classes, the equivalent of today's FICC segment contributed a small proportion of our total revenues, as seen in the dark blue segment of the pie chart on the left. Eight years on, our FICC business has grown to account for about 26% or over $320 million of revenues. Today, FICC equities cash, equities derivatives collectively made up 80% of our total revenues and each contribute an almost equal proportion to our business. Our platforms and other businesses, which include revenues from market data, connectivity, Baltic Exchange, energy market company, contributes a robust 20% to group revenue. We remain well poised for further growth from our multi-asset strategy. Let me now unpack our FICC segment, which has delivered mid-teens percentage growth in the last three years. In SGXFX, our combination of listed FX futures and OTCFX across the full suite of workflow and matching services solidifies our position as a leading company. gateway to the global FX market. Since we embarked on building an integrated FX franchise in FY 2021, our combined OTC and FX futures average daily volumes, or ADV, have increased two-fold. This year, we maintained the growth momentum for our currency derivatives, achieving 36% growth in total volumes. Open interest across listed FX futures gained 76% year-on-year and we retain our position as the leading venue of choice for both international RMB and the Indian rupee futures. In June this year, both our RMB and rupee futures achieved their highest single-day open interest record at almost US$22 billion and US$7 billion, respectively. We see this momentum continuing through the start of the new financial year. Just this week, on Monday, amid market volatility across global markets, our RMB futures registered a single-day volume record of over US$35 billion in notional value, our highest ever. We have also made inroads in other key Asian currencies, particularly in our current one and Thai baht futures where we saw healthy volume growth. There is an increasing demand from our clients for transparent and liquid tools to effectively manage their Asian currency exposures. In OTCFX, we have set a target of achieving US$100 billion ADV by 2025, FY25 or earlier. I'm pleased, as you heard from Yalung earlier, to report that we've well surpassed this target in FY24, with a 47% growth in ADV to US$111 billion. Our SGX commodities franchise continues to grow from strength to strength, as seen from the robust sustained growth over the past three years. Total commodities volume has more than doubled since FY 2021, while year-on-year growth has been a commendable 50%. In yet another record year for iron ore volumes, we saw wider client adoption across the US and Europe, On the back of our efforts to enhance participation during US and European trading hours and provide round-the-clock trading, iron ore has emerged as a global commodity given its high correlation with industrial growth and infrastructure development. As iron ore becomes a significant trade and economic indicator, much like oil, our iron ore derivatives will become an important part of the institutional investors' portfolio. Our deliberate efforts to deepen and diversify the ecosystem by including more financial market participants has resulted in an increasing proportion of screen trading for the contract. Today, volumes of our R&R contracts have reached more than three times that of the underlying physical seaborne market. We saw strong volume growth in our freight suite too, which is another key parameter for global trade. As the world's largest dry bark FFA marketplace, we will strive to harness the synergies of integrated cargo and freight risk management. The increase in volatility and market risk arising from geopolitics and weather patterns have contributed to freight rates becoming more volatile than ever. This could increase risk management requirements using our freight and iron ore contracts, especially given that iron ore is the most commonly shipped dry bulk cargo worldwide. Beyond our flagship contracts, we have seen healthy volumes across the entire commodity suite. Rubber, rubber derivatives volume were up more than 60% in FY24, exceeding the size of the physical market for the first time at 3.5 million lots. This was largely driven by stronger hedging demand from improving market fundamentals, higher participation from financial traders, as well as growing interest from European and US clients. This marks the third year of our partnership with New Zealand Exchange. Together, we have expanded the ecosystem of physical and financial participants who recognize our dairy product suite as a benchmark for seaborn dairy market globally. FY24 dairy derivatives volume will up 31% year-on-year with a steady annual growth rate of more than 30% for both volume and open interest. Moving on to our other derivatives products, notwithstanding the dip in total equity derivatives volume in FY24, SGX is still the main international and efficient venue for accessing key Asian economies. Our Pan-Asian Equity Derivatives Suite provides global investors with a single gateway to access Asian economies. A shift in monetary policies, elections-led volatility, and the global AI semiconductor thematic have been driving investment flow. The latter led to record single-day volumes for our flagship FTSE Taiwan contracts, and we saw open interest growing 7% to 955,000 contracts. Open interest for our SIMSKI futures also rose to 212,000 contracts, close to a record level last seen in October 2022. With a new global interest rate macro environment, we saw the potential to develop a short-term interest rate product suite. At the end of July, we launched interest rate futures linked to Singapore and Japan's overnight interest rates. This augmented our existing share of Singapore and Japanese derivatives, enhancing our multi-asset proposition. The launch of our Tokyo Overnight Average Rate, or TONA, futures has been quite timely, given the tightening of Japan's monetary policy and recent market volatility. There's been good initial success in our TONA futures, as well as an increase in activity in our mini-GAGB futures. On the securities front, we further expanded our Thailand-Singapore deposit receipt linkage with five new Singapore DRs. Collectively, we now have eight DRs with underlying Thai blue-chip companies which make up more than 40% of the SET benchmark index. Retail interest in the DRs have been growing, with net inflows increasing five times since the launch. The pipeline of DRs on the link is robust. Singtel's DR is the latest to list on the Stock Exchange of Thailand in April. We see healthy trading across the DRs listed in Thailand and are seeing further opportunities to grow the pipeline. Besides DR, we've also launched our first actively managed ETF in January this year, offering investors exposure to a diversified portfolio of Japanese companies. We're continuing enhancing our product suite, such as expanding our structure certificates to include other underlying markets. Turning to China, where we have a comprehensive and liquid suite of products, Given our unique position as the nexus between China and ASEAN, along with our multi-asset offering, there are many opportunities for us to capitalise on cross-border fund flows and the internationalisation of China's financial market. The revival in interest and growth prospects of China boosted open interest of our flagship FTSE A50 contract through the second half of FY24. with open interest hitting an 80-month high of US$12 billion in May. Our FTSE H50 contract, which has a higher concentration in high-growth technology stocks, similarly saw volume growth of close to 50%. Combined, our A50 and H50 contracts offer broad capital-efficient access for investors looking to calibrate their exposures across different sectors. Complementary to our Chinese equity derivatives are our RMB futures, which registered a significant increase in volumes and open interest by 50% and 65% respectively. The ability for our customers to achieve capital efficiency across a comprehensive range of asset classes, including our I&O and freight offering, is one of SGX's competitive advantages. In the area of cross-market connectivity, our ETF links with the Shenzhen Stock Exchange and Shanghai Stock Exchange are one of the most successful mutual ETF product links between China and other international markets. To date, we have listed seven ETFs under the link with a combined AUM that has grown nine times to SING dollars, $290 million as at the end of July this year compared to a year ago. We are exploring opportunities in regional equities or yield-focused products in line with investors' demand and interest. With the growth of the Indian economy in recent years, we are well positioned to build upon the success of our GiveConnect. The ability of Gift Nifty Futures, Indian Single Stock Futures and Indian Rupee Futures on SGX enhances capital efficiency for clients who want to manage their exposures in India through a single clearinghouse. Trading of our gift-nifty futures has grown steadily since the start of the full-scale operation in July last year. I am pleased to share that open interest in our gift-nifty contracts has grown 39% since migration to now about 271,000 contracts, with notional open interest growing 73% to US$13 billion. We saw a healthy 16% growth in volumes on a half-on-half basis and are on track to achieve pre-migration volume levels in 2025. We will seek to deepen our collaboration with the National Stock Exchange of India and explore opportunities that will drive mutual success, including the development of new products for GiveConnect. With rising interest in Indian stocks, our Indian single stock futures suite also achieved new milestones, with notional open interest hitting a record of US $1.3 billion in June this year. We'll look to facilitate risk management efficiency via our Indian single stock futures and give nifty futures. Our Indian rupee futures contract completes the waterfront for India access. Against the backdrop of recent India elections, our rupee futures achieved a doubling of notional open interest. We expect to remain the venue of choice for international rupee futures going forward. Looking ahead, we aim to grow group revenues excluding treasury income between 6% to 8% CAGR in the medium term, driven mainly by low to mid-teens percentage growth in our OTCFX and exchange-traded derivatives businesses. Our revenue CAGR over the last three years was slower than our previous guidance of mid to high single digit due to a slower cash equity business coupled with the underperformance of scientific beta. As a multi-asset exchange, we remain committed to our cash equities and indices businesses. The stock market is an important pillar of Singapore's financial ecosystem. We will work with a review group established by MAS on market and regulatory initiatives that could structurally improve the liquidity of our stock market. The success of our DR linkage with Thailand has laid the groundwork for greater collaboration with other ASEAN exchanges using depository receipts. We have inked MOUs with the Indonesian Stock Exchange and most recently with the Vietnam Exchange. SGX will continue to foster close ties with our regional partners to expand access to regional investment opportunities. We expect our commodities and currency franchises to play an important role in future growth. Leveraging on our market leadership in both iron ore and freight derivatives, we will assess opportunities to offer an integrated solution for clients to manage bulk cargo and freight risks on a single capital-efficient platform. We will further tap on the growth opportunities in our integrated FX franchise. OTCFX currently contributes about 3% to our group's EBITDA. We aim to grow this to a mid to high single-digit percentage of group EBITDA in the medium term. Further upside in OTCFX contribution to our bottom line could come from our efforts on scaling client acquisitions in Europe and Asia Pacific and cross-selling across geographies. At the same time, we'll optimize our expenses by integrating our distribution functions and technology platforms. We look forward to further advancing our position as an international multi-asset exchange. Thank you very much for your attention. With that, I conclude my presentation and invite my colleagues to join me for the Q&A. is Nick