Hong Kong Exchanges & Clearing (00388.HK) 2021 earnings up 9% slightly miss expectations April 22, 2022 137

PSR Recommendation: BUY Status: Upgraded
Target Price: HKD464.70

Amid continuing market volatility and a slowdown in the Q4
HKEX reported 4Q2021 revenue of HK$4.73bn, -7.2% YoY and -10.9% QoQ. Shareholders’
net profit was HK$2.67bn, down 8.6% YoY, 17.8% QoQ, slightly below the consensus
estimates. Although 2021 started exceptionally well, 1Q2021 with record quarterly Headline
ADT of $224.4bn, 2Q2021 & 3Q2021 ADT both higher than the same period in 2020.
However, amid continuing market volatility in 2021 and a slowdown in 4Q2021. The ADT 4Q
has dropped to 126.4bn, down 24% YoY. In addition, Derivatives ADV decreased by 17% and
ADT of Northbound Trading of Stock Connect decreased by 20%, resulting in trading and
clearing fees decline in 4Q. Operating expenses decreased by 7.8% YoY, due to lower staff
expenses. This led to EBITDA margins broadly flat as 74%. The IPO pipeline remained very
robust, with the demand of US-listed Chinese companies homecoming listings in Hong Kong,
as well as the introduction of a listing regime for SPACs and the enhanced listing regime for
overseas issuers. However, numerous challenges posed by uncertainty surrounding the
continued inflationary pressure, the tightening of the Fed’s monetary policy, the entry of
interest rate hike cycle, ongoing geopolitical risks and the pandemic recovery.
2021 Annual Results
FY2021, revenue and other income of HK$20.95bn, up 9% against the previous record set in
2020. Profit attributable to shareholders up 9%, to a record high of HK$12.5bn. Core
business revenue of HK$20.1bn, up 10% compared with 2020, benefit from the headline
ADT set new record in 2021, reaching HK$166.7bn, up 29% YoY. Record Stock Connect
revenue and other income of HK$2.724bn, up 41% YoY. Stock Connect Northbound and
Southbound reached record annual turnover of RMB27.6 trillion and $9.3 trillion, up 31%
and 70% YoY, respectively, and record ADT of RMB120.1bn and $41.7bn, up 32 per cent and
71% YoY, respectively. Operating expenses increased by 2% compared with 2020, mainly
due to higher IT and computer maintenance expenses and higher product marketing
expenses and cash incentives for new products. EBITDA margin was 78%, 1 per cent higher
than 2020.
2021 review, with a total of 98 company listings raising HK$331.4bn, down from the strong
2020 (154 company listings raising HK$400.2bn) and 5% higher than 2019 (HK$314.2bn).
During the year, 59 new economy companies, including 31 Weighted Voting Rights (WVR),
healthcare and biotech firms (including Chapter 18A listings only) and/or secondary-listed
companies, accounting for 88% of IPO funds raised in Hong Kong during the period. Total
market turnover in 2021 reached HK$41.2 trillion, up 28% compared with 2020. Total
turnover of securitized derivatives (DWs, CBBCs and Inline Warrants) reached HK$4,956.8bn,
up 8% compared with 2020. As world metal trading remained under pressure, the
chargeable average daily volume of metals contracts traded on the LME decreased by 4%
from 2020

About the author

Profile photo of Eric Li

Eric Li
Analyst
Research

李浩然先生(Eric Li) 高級分析師 現任現為輝立証券持牌高級分析師,曾任職股票基金、家族辦公室及證券公司等,擁有多年的證券研究部門從業及投資經驗,並先後於香港最暢銷的財經媒體撰寫投資專欄。畢業於香港理工大學電子計算系。 Eric is currently a licensed research analyst at Phillip Securities. Prior to joining Phillip Securities, he has years of equity research and investment experiences in asset management company, family office and securities company. Meanwhile, he has written investment columns in Hong Kong`s best-selling financial media for years. He holds Bachelor of Arts in Computing from The Hong Kong Polytechnic University.

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