[Event] HKEx announced its results for the first quarter of 2024: revenue and other revenue of HK$5.201 billion, -6% YoY, and net profit to mother of HK$2.97 billion, or -13% YoY. The decline in net profit due to weak markets is mainly due to weak markets, etc. ROE (unannualized) for the first quarter was 5.89%, -1.2pct year over year.
Spot market transactions continued to decline year over year, and IPOs declined. The spot segment achieved revenue and other revenue of HK$1,881 million in the first quarter of 2024, -11.6% year-on-year, accounting for 36% of revenue. The average daily trading volume in the spot market was -22% YoY to HK$99.4 billion. The average daily turnover of the Shanghai Shenzhen-Hong Kong Stock Connect northbound and southbound was HK$133 billion and HK$31 billion, respectively, +37.1% and -17.3% respectively. The average daily transaction volume of Bond Connect Beixiangtong was 45.2 billion yuan, +22% year-on-year, setting a record high for the quarter. The Stock Exchange issued 12 IPOs, a year-on-year decrease of 6, with a total financing amount of HK$480 million, or -28.4% year-on-year.
The average daily turnover of futures exchange derivatives contracts reached a quarterly high. The equity securities and financial derivatives segment's revenue for the first quarter of 2024 was HK$1,572 billion, -15.5% year-on-year, accounting for 30% of revenue. The average daily trading volume of Stock Exchange derivatives warrants, bullbear securities and warrants was -21%, trading volume was -35.6% year-on-year, and the average daily turnover of Futures Exchange derivatives contracts and Stock Exchange options contracts was +13.5% and -3%, respectively. The number of newly listed warrants and bullbear certificates was -35% and -14.9%, respectively.
Commodity segment: Commodity segment revenue and other revenue for the first quarter of 2024 was HK$673 million, +33% YoY.
The average daily turnover of LME fee transactions in the first quarter of 2024 was +31% year-on-year. LME transaction fees and LME Clear settlement fees increased by 40% and 39% respectively, mainly due to a 31% increase in the average daily volume of fee-traded metal contracts and an increase in trading and settlement fees from January 1, 2024.
Data & Connectivity Division: Revenue and other revenue of the Data & Connectivity segment for the first quarter of 2024 was HK$523 million, +3.6% year over year. The 5% increase in network fees in the first quarter of 2024 was due to increased sales due to new savings; the 16% increase in device hosting service fees was due to increased subscriptions from new customers and increased usage from existing customers.
Company projects: The company's project revenue for the first quarter of 2024 was HK$552 million, -1.4% year-on-year. The company's capital investment income was HK$535 million, and the annualized net return on investment was 6.16%, -0.15pct year-on-year.
The reasonable value range was HK$320.00-333.40, maintaining the “better than the market” rating. We estimate that HKEx achieved total operating income of HK$229/246/26E respectively, or +11%/+8%/+6% year-on-year; net profit attributable to HKEx shareholders was HK$132/142/14.9 billion, respectively, or +12%/+7%/+5% year-on-year. Using second-stage DDM to evaluate the Hong Kong Stock Exchange, a reasonable value range of HK$320.00-333.40 was obtained, corresponding to 2024E PE, which was 30.7-31.9 times, respectively. Maintain an “better than the market” rating.
Risk warning: Hong Kong's spot and derivatives trading volume has shrunk sharply; progress in connectivity has stalled; the effects of LME reforms have fallen short of expectations, and volume and price have plummeted.