HKEx's profit slips 7% to HK$1.15b

Listing fees and income from sales of information were lower than expected, while operating cost rose by 20%.

The drop in profit was somewhat offset by the investment income. Kim Eng analyst also mulls on HKEx's disclosed interest on the London Metal Exchange takeover. 

Here's more from Kim Eng Hong Kong:

HKEx’s 1Q12 net profit was HK$1.15b, down 7% YoY and down 10% QoQ, in line with estimates. Its 1Q12 net profit reached 23% of old Kim Eng FY12 profit estimates. Listing fees and income from sales of information were lower than expected, these were however offset by the stronger-than-expected investment income. With global capital market performance worsened in 2Q12, investment income is expected to come under pressure.

Analyst comment:

Expenses went up despite falling income on YoY basis. 1Q12 average daily turnover was down 17% YoY, though income affected by turnover only fell by 10%, causing the total income to fall by only 2% YoY. On QoQ basis, 1Q12 ADT was up 7% from 4Q11. Income affected by turnover however fell by 3%, causing the total income to fall by 3% QoQ. Despite the fall in income, operating cost rose by 20%/21% YoY/QoQ, slightly higher than expected.

The old FY12 ADT estimate of HK$65b remains unchanged, but there is some downside risk to this estimate. Average daily turnover in Apr12 was only HKD50b, much lower than the 1Q12 ADT of HKD63.2b.

HKEx disclosed interest in LME takeover. HKEx officially disclosed it is one of the bidders in the potential takeover of the London Metal Exchange. As stated in a previous report, HKEx is likely to overpay for the acquisition, and the acquisition is unlikely to bring any synergy or positive re-rating to HKEx.