SGX reported 3Q FY6/09 net profit of S$53.3 mn (-26% QoQ/-46% YoY), posting the lowest profit since 1Q FY6/07, pulled down by weakness in all revenue streams and an increase in IT costs.

Equity daily average turnover fell to S$0.9 bn (-20%/-57%) due to falls in markets as well as velocity (60% vs 67% in 2Q09). Futures turnover, which had been holding up relatively better, also fell 24% in 3Q09 pulled down by weakness in all contracts.

Not surprisingly, 3Q09 was the worst quarter for IPOs in recent history œ with two IPOs raising only S$83 mn. But SGX is seeing increased interest in fund raising through rights issues.

SGX cut variable staff bonus (-35% QoQ) which remains the only avenue to cut costs as SGX continues to build its technology infrastructure resulting in increased IT-related costs.

SGX will focus on domestic derivatives, commodity trading related products and OTC clearing to support near-term growth.

We cut FY10-11E estimates by 10-11% assuming a lower S$1.2-1.5 bn (from S$1.3-1.7 bn) daily trading average in FY10-11E.