HKEx’s Third-Quarter Results Weaker As Capital Markets Remain Challenging

With equity markets remaining challenged in the third quarter, Hong Kong Exchanges and Clearing, or HKEx’s, third quarter was weak. Excluding investment income, revenue was 17% lower against the same period last year at HKD 4.3 billion, while the high operating leverage saw EBITDA and earnings per share decline by a larger magnitude of 28% and 30%, respectively. We have lowered our fiscal 2022 and fiscal 2023 revenue forecasts by 6% and 8%, respectively, assuming lower average daily turnover, or ADT, for the cash market. We factor in ADT of HKD 117 billion for fiscal 2022, compared with our earlier assumption of HKD 143 billion. The lower cash market ADT assumption is offset by a higher derivatives futures volume assumption, this continues to perform well amid market volatility. While third-quarter operating expense was up 13% against the same period last year as the exchange continues to invest in its platforms, this was kept largely flat quarter on quarter. Our fair value estimate is tweaked to HKD 463 from HKD 470.