Singapore Exchange Limited (S68.SI) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the SGX FY 2021 results briefing. The agenda for this morning will be as follows: first, the presentation of our financial highlights and performance by Ng Yao Loong, our CFO; this will be followed by a business update by our CEO, Boon Loh Chye. We will then end off with the question-and-answer session with the panel comprising senior executives from SGX. For those of you who are viewing this briefing through webcast, you may change the resolution of the broadcast to a higher setting if the images are not clear. The settings can be found at the bottom right of the webcast window. So without further delay, let me now invite Yao Loong to deliver our financial highlights. Yao Loong, please.

A very good morning, and thank you for taking the time to join our FY '21 full year results briefing. SGX achieved a strong performance in FY '21 as we invested in growing our business. We accomplished a similar record revenue performance as FY '20 at almost $1.1 billion amidst a challenging environment. One major challenge, which we have outlined before, is the prolonged low interest rate environment. It is an exogenous factor that has affected our treasury income, or TI. So if we exclude treasury income, which the blue column show, underlying business revenue was up 7%, which demonstrates the strength of our platform. This is in part also driven by the revenue contribution from our 2 recently acquired subsidiaries, Scientific Beta and BidFX. When we look at total expenses, it is useful to separate out the expense contribution from the 2 subsidiaries and the underlying core business. SGX is no longer a monolithic entity, but a combination of strong core businesses and growth engines. So if you exclude the 2 subsidiaries, our underlying expenses actually declined 4%. This shows our discipline in maintaining the cost base of our underlying core business, which then allows us to invest for growth. This is also fairly evident when we look at the EBITDA margins. Excluding treasury income and the 2 subsidiaries, the EBITDA margins of our underlying core business improved by 1 percentage point. What this slide shows is the breakdown of our revenue growth by 2 segments, our underlying core business and the 2 subsidiaries, Scientific Beta and BidFX. As you can see from the top half of the page, combined revenue from Scientific Beta and BidFX came in at $75 million, which is about 7% of total revenues, an increase from the 6% we disclosed in first half of financial year '21. And with the addition of MaxxTrader, the proportion of revenue from our fast-growth subsidiaries would exceed 9%. As for our underlying businesses, which is in the bottom half of the page, FICC and cash equities were the main revenue growth drivers. FICC revenue increased $10 million as total commodities volumes rose 3% to 25 million contracts. In commodities, we maintained near 100% market share of the offshore iron ore market. Financialization efforts are making good progress. Screen trading now contributes about 20% of iron ore volumes and contribution from the T+1 session has increased to 15% of total volumes. Freight volume was up 42%. Market share exceeds 60% as we continue to be the platform of choice for clients in a pandemic-led supply-constrained environment. As for currencies, while volumes were comparable year-on-year, we continue to lead in terms of market share for our key contracts. Market share for our rupee contracts rose 12 percentage points to 69% while CNH was comparable at 83%. With the addition of BidFX and MaxxTrader upon completion, the FX franchise comprising both OTC and exchange traded futures will be a key growth driver. Revenue for cash equities increased $15 million due to higher trading revenue, settlement activities and corporate action. SDAV increased 2% to a higher and sustained level of $1.35 billion. We saw a wider group of participants, including retail investors, market makers and active traders. Retail value traded grew almost 40% year-on-year. Turnover contribution from ETFs grew almost 20% during the year with the launch of 4 new ETFs. This continues to look promising as we see a strong pipeline of new ETF listings in the year ahead. Average clearing fee for securities was comparable at 2.68 basis points. Our equity derivatives business demonstrated its resilience as the franchise rebounded in the second half of FY '21, following successful liquidity switch to the FTSE Index Series in the first half. Overall, volume declined 6%, mainly impacted by the lower Nikkei volumes. But what is more important is that our network and portfolio effects of our platform remain intact. Our flagship China A50 and [ schemes key ] contracts saw a volume increase by 8% and 4%, respectively, while the yield from these products were higher. Overall clearing fee for equity, currency and commodity derivatives was comparable at $1.34. The average fees for the second half was higher at $1.40 compared to $1.27 in the first half. Our average fee in the first half as you aware was lower largely due to the implementation of introductory fees for the FTSE Asian expansion suite. As for DCI, revenue for the underlying business, that is excluding Scientific Beta, was comparable. The addition of Scientific Beta contributed an additional $21 million of revenues to the DCI business segment. Scientific Beta's assets under replication, or AUR, has now exceeded $60 billion as of end FY 2021. This expanded solutions beyond Smart Factor strategies by adding a new climate index solution. The main drag to our revenue is the decline in TI. While average collateral balances have increased year-on-year, the low interest rate environment has and continues to weigh on our treasury income. So if I can sum this revenue slide, operating revenue from the various businesses has remained strong. Excluding treasury income, business revenue was up 7%. And even if we further exclude the revenue contribution from the 2 subsidiaries, revenue from the underlying core business remained comparable year-on-year. Moving on to expenses, which on a headline basis increased 8% year-on-year. The increase has been driven by the investment for growth, underpinned by cost discipline in the underlying core business. Let us first take a look at the expense profile of our underlying core business, which is shown in the bottom half of the page. We see a year-on-year decline of 4% to $458 million from $475 million. The decline was mainly due to a few factors: $11 million lower depreciation expenses; $10 million lower staff costs and absence of one-off costs relating to the SGX Care Package incurred a year ago; and $4 million decline in discretionary costs, mainly due to lower marketing and traveling. Processing and royalties increased 8% or 16% due to higher royalties incurred for key contracts and the launch of new contracts as part of our FTSE Asian expansion suite. This was partially offset by a decline in royalties incurred from contracts with lower volume. The expense decline in the underlying core business has allowed us to create the capacity to invest in Scientific Beta and BidFX. Collectively, both contributed to an expense increase of $55 million. If you compare the revenue and expense contribution, both subsidiaries are profitable. I've mentioned a few weeks ago at the Analyst Day presentation that we would see higher total expense growth in the near term as we continue to invest in our faster-growing businesses. However, in the medium term, I would like to reiterate that we do expect expense growth to moderate to the mid-single-digit region as we build scale. Similarly, margins, be it EBITDA operating has been impacted in the near term because of 2 reasons: one, our faster-growing subsidiaries have lower margins. Scientific Beta and BidFX combined has an EBITDA margin of 37% on a stand-alone basis. Second, the decline in TI has aimed disproportionate impact on margins. This is because the dollar decline in treasury income reduces EBITDA and operating profit by $1. In other words, it is a direct drop through to the bottom line. In order to have a better appreciation of the operating leverage of the underlying core business, we should exclude TI and the 2 subsidiaries. And if we do so, the underlying EBITDA and operating profit margins would have gone up by 1 percentage points and 2 percentage points, respectively, year-on-year. Margins will recover as we maintain cost discipline and build up our growth businesses such as FX. TI or treasury income will continue to weigh on our margins. But over the medium term, I expect margins to recover to levels of FY '20. Looking forward, as we continue to invest for growth, we expect total expenses in the new financial year FY '22, to be between $565 million to $575 million. Let me explain the nature of expense growth. From the chart, you will note that expenses will grow 9% in FY '22, if I use the midpoint of the range. But more than half of this increase will be for growth. A total of 5 percentage points for growth in the underlying core and subsidiaries business, of which 2 percentage points will be for growth initiatives, such as the setting up of ECN and climate-related initiatives, and 3 percentage points will be for continued investments in the faster-growing subsidiaries, Scientific Beta and BidFX. As for the remaining 4 percentage points, they are for expenses relating to our underlying core businesses, which you may call BAU expenses. As you are aware, as a critical market infrastructure, SGX has to continually invest to maintain our resilience. If we look over a 2-year trend between FY '20 and FY '22, our underlying core business expense, excluding Scientific Beta and BidFX, that is, will show a growth rate of 1.5% per annum. This takes into account the expense growth associated with the investments I just talked about, such as the ECN. So it is not just about BAU expense growth. In other words, what I've included is the 6 percentage points increase, which I've highlighted in red. Underlying core expense in FY '20 was $475 million after excluding $12 million of expenses from Scientific Beta. It further declined 4% to $458 million in FY '21. If you layer on the 6 percentage points increase I just talked about, you will be able to work out the math, which equates to 1.5% per annum growth over the 2-year period. The expense guidance I'm sharing today excludes transactions that have been announced but not completed such as the MaxxTrader acquisition. As the completion date is not certain, although we do expect the deal to complete in the second quarter of financial year '22, the inclusion of MaxxTrader is expected to add a further $25 million of growth expenses in the new financial year. This is an annualized basis. Our expected CapEx spend in financial year '22 is consistent with our growth aspirations. CapEx for FY '21 was $51 million, $10 million higher compared to the previous financial year but $4 million lower than the guided CapEx range for FY '21. We will invest more in FY '22. CapEx is expected to be between $60 million to $65 million as we grow our fixed income and FX businesses as well as in partnership initiatives. We will also continue to improve the resilience and upgrade our infrastructure. We introduced the adjusted EBITDA and NPAT in FY '21 to provide the market with greater transparency on certain items such as the one-off and noncash items. Looking at the adjusted metrics for FY '21, they were comparable, whether they are on the adjusted or the reported basis. The full table of reconciliation between the metrics are set up in greater detail in the SGX net results release. But one thing I would like to highlight is the inclusion of a $10 million earn-out contingent consideration for BidFX. This is a nonoperating expense item, which has an impact on our FY '21 earnings. In other words, if we did not make a provision for this one-off item, earnings would have been $10 million higher. Let me explain further this earn-out structure. When we acquired BidFX a year ago, we put in place this structure to derisk the transaction for SGX. Rather than pay upfront this amount, regardless of the actual calendar year '21 revenue performance, we agreed that we would only do so should BidFX meet certain predetermined revenue targets. In other words, we pay less upfront and top up only if BidFX outperforms. At this stage, we are halfway through the calendar year. Given BidFX revenue outperformance in the first half of calendar year '21, we have decided to make an additional provision of $10 million. This number is not a final number. The final actual payout would depend on the actual calendar year '21 revenue number. The fact that we are making such a provision at this stage means that the value of the business has grown. Our estimate is that the value of BidFX has increased by 15% to 20% of our initial investment value, exceeding the additional contingent consideration. You will have read from today's announcement that Moody's has assigned a rating of AA2 to SGX. This is the highest rating that they have given to any exchange group. Our robust credit fundamentals at the group and clearing house level have always been known to our customers, clearing members and stakeholders. Our leverage levels have been low. Our interest coverage ratio has been very healthy, and we have strong cash reserves. What the Moody's rating adds is a strong affirmation by an independent and credible third party. So not only does it demonstrate our strong fundamentals, it also reinforces our risk management value proposition to customers. Looking ahead, Assuming that the acquisition of MaxxTrader is financed solely by debt, our gross debt-to-EBITDA ratio will be at 1.1x, still at a healthy level and low compared to some of our peers. The Board of Directors has proposed a final quarterly dividend of $0.08 per share. If approved at our AGM in October, the total dividends for FY '21 will be $0.22 per share or 5% higher year-on-year. As you can see, our operating cash flow, our adjusted earnings per share more than cover the dividends we will pay out to our shareholders. The free cash flow that we retain after paying out our dividends will be used for CapEx investments and to build up our cash resources. As I mentioned at the Analyst Day, we are focused on total shareholder returns, a combination of earnings growth and dividend yield. As we drive earnings growth, we intend to put in place a scrip dividend scheme to offer our shareholders a cost-effective alternative of participating in our medium-term growth journey. Such a scheme will give them an option to reinvest their cash dividends in SGX shares. Let me be very clear. The intent of the scrip dividend scheme is not to shore up SGX's financial resources to meet any near-term liquidity requirements. We will provide more details of the scheme, including the timing, in due course. And for the avoidance of doubt, this scheme is not intended for the final quarterly dividend proposed for financial year '21. Now let me hand over to Boon Chye, who will deliver the business update.

Good morning, everyone. Thank you for joining our FY '21 year-end results briefing. I would characterize performance in FY 2021 as a strong one as we advance SGX as a leading international multi-asset exchange. Our strong core businesses of equities, FICC or fixed income, currency and commodities, together with DCI, data connected indices, plus the new growth engines and emerging opportunities enable us to serve our customers well as they seek growth opportunities in Asia. Not only have we grown our revenues from about $780 million in FY 2015 to $1.05 billion today, we have also diversified our revenue streams with FICC and DCI contributing 34% of revenues in FY 2021. At the same time, we have invested by acquiring faster growing businesses, such as Scientific Beta, BidFX and more recently, MaxxTrader and seeded emerging opportunities such as a digital fixed income marketplace known as a market node and in nature-based sustainability solutions by Climate Impact X. For our core business, starting with cash equity, I would like to highlight 4 areas. First, in meeting the diverse capital raising needs. The SGX capital market is an enduring one as we help companies raise capital across the economic cycle, companies raising on average 4x more in secondary fundraising. Looking at some of the listings in FY 2021, which cut across a spectrum of different industries, the performance of some of the new mainboard IPOs in FY '21 have been positive. Looking at the chart on the left, you will see that Nanofilm's market cap more than doubled and its turnover velocity was almost 150%. And in Aztech Global, the turnover velocity was almost 300% and its market capitalization was up 20%. This has engendered good interest from issuers as well as providing investors with a wider spectrum of companies and sectors to invest in. We see a strong pipeline of mandates in the current financial year. We have also completed our consultation for listing SPACs, or special purpose acquisition company, and that is undergoing regulatory approval. Second, we have broadened our investment solutions by expanding the securities product shelf across asset classes and geographies. And you heard from Yao Loong earlier in ETFs, AUM increased by over 60% from last year to reach almost SGD 10 billion. And new ETFs that were launched has also seen growth in AUM. More launches of ETFs are in the pipeline, and we hope to continue with the momentum. Third, we provided new and enhanced post-trade services and supporting trading activities with improved settlement workflow. The revamped securities borrowing and lending program saw a 17% increase in outstanding balance to reach close to SGD 60 million. But, as Yao Loong has said, we expanded participation in the market. Our revamped market maker and active trader program has close to 40 participants. There was also healthy growth in regional retail participation from ASEAN. In derivatives, it was a strong performance in a year of transition, where we successfully conducted a world's first liquidity switch or benchmark equity indices contracts to FTSE. We also expanded our product shelf at the same time and introduced ESG versions of certain composite and country indices such as Emerging Markets Asia ex Japan, Emerging Markets Asia and FTSE Blossom Japan. We've also launched a new asset class in Nikkei Japan Green REIT. We complemented our China A50 with the launch of China H50. The FTSE China H50 is a liquid basket of stocks tracking the top biggest Chinese names that comprises its shares, red chips and P chips that are listed in Hong Kong. We now can provide investors a comprehensive access to Greater China and its fast-growing new economy sectors in both the Asia and the offshore market. One such notable example of the competitive advantage that SGX has from the very strong network and portfolio effects of our ecosystem was the launch of the Asia ex Japan net total return futures. In just under 1 year, starting from 0 our open interest is now 2/3 of the global Asia ex Japan NTR market. Moving on to growth engines. Starting with the faster-growing FX business. We are investing to build Asia's largest integrated FX platform with the acquisition of MaxxTrader, and we hope to complete that in the second quarter of the financial year. Our FX average daily volume would reach USD 75 billion. In our FX futures market, not only did we receive industry recognition, we notched several records last year. For example, a record single-day volume for the Indian rupee dollar futures that reached almost close to USD 4.5 billion. Similarly, a record single day open interest in the same rupee contract that reached almost USD 4 billion. And in CNH, the open interest reached USD 11 billion. So having established ourselves as the largest and most liquid FX derivatives exchange in Asia, we expanded our product offering further. We launched several other contracts, largely in Korea, the Korean won, the Sing dollar, making it larger size and also launched the Indian rupee onto contracts and options and also introduced the mini contract version of the CNH. Also very pleased to report that there has been good progress in BidFX. Yao Loong mentioned the provision of the $10 million, and that's because BidFX has outperformed its revenue targets that were set. And also, the number of active users are up close to 30% at the end of the financial year. And average daily volume has increased by over 60% to close to USD 40 billion. With the acquisition of MaxxTrader, it will broaden our client base to over 200 institutional clients, covering the full spectrum of the buy side and sell side. We will also leverage MaxxTrader's technology to set up the ECN, Electronic Communication Network, FX marketplace. This ECN FX marketplace will provide so-called all-to-all anonymous trading. It will offer our clients a full suite of FX futures and OTC solution, coupled with low latency access and price discovery anchored in Singapore, Asia's largest FX trading hub. In our index business, we accelerated product development through Scientific Beta's research pedigree. We will be partnering asset managers and banks to launch demanded products and ETFs. The Climate Impact Consistent Indices is a new product that has been launched and it caters to the growing demand from asset owners to meet their net 0 emission commitments in the year ahead and beyond. The alignment between portfolio construction for investors and the climate performance of companies is increasingly a key focus in the investment world. Scientific Beta's new CICI series provides the closest alignment between constructing a portfolio and the climate performance of companies, and that is in line with net 0 investment frameworks. And as it gains adoption with asset owners, we hope to scale this in terms of asset under replication. Moving to another area of growth and that is in fixed income. We are developing a digital marketplace covering the full life cycle and leveraging on our strength as a global exchange for Asian bond listings. We are home to issuers from more than 60 diverse industries across 45 countries and have a leading market share in G3 APAC bonds with a 44% market share. And building on this strength, we are developing a digital fixed income marketplace for enhanced workflow and customer experience covering the full life cycle of fixed income securities. And Marketnode, it is a JV that will provide digital asset primary issuance, coupled with postpaid and asset servicing. And we will provide global access to Asian ESG bond data via a partnership with NASDAQ in the NASDAQ Sustainable Bond Network, and this will cover green, social sustainability fixed income securities. And in trading, we will provide global access to Asian bonds via our joint venture in TrumidXT. It will enhance liquidity and execution of Asian bond trading globally. And in the postpaid, we will digitize that and partner up with other CSD and ICSD for Singapore-based settlement. And as the world deals with climate change, we are leading the way as an Asian exchange in sustainability to build a resilient future. Our vision is to be the leading capital and trading hub, enabling sustainable finance and credible transitions with end-to-end product solutions and ecosystems. We have recently demonstrated our commitment by being the first Asian exchange to commit to 1.5 degree Celsius aligned science-based emission reduction targets. Corporates and investors are making their voices heard. They are embarking on a decarbonization path. And as they do so, a few things have to happen. One, we will have to measure carbon footprint, set emission reduction targets, reduce absolute emission, neutralize the unavoidable residual emissions and also on a year-on-year basis, compensate and report progress. And what does all this mean? It will lead to opportunities in debt and equity financing. And today, SGX already provide green, social, sustainability and sustainability-linked bonds. We will provide platforms for listing of infrastructure and decarbonization funds. And today, we already provide renewable energy certificates via EMC, our subsidiary, and in future, carbon credits via Climate Impact X. And in the area of investment and risk management solutions, the launch of Climate Impact Consistent Indices, ESG version of benchmark derivatives contracts and also we'll be launching ESG exchange traded funds and other products and not forgetting data the -- and as bond network, our NASDAQ Sustainable Bond Network partnership and also we'll be launching a ESG data portal. Looking ahead, and you heard from Yao Loong, we announced a rating of AA2 by Moody's, the highest assigned to any exchange group globally, reaffirms the strong credit fundamentals of SGX and our clearing houses and also reinforces our risk management value proposition to customers. We are well poised to help our customers capture growth opportunities in Asia and capitalize on trends in digitalization, sustainability and passive investing. And in so doing, we will become the largest Asian FX integrated platform. We will also provide a digital fixed income marketplace covering the full life cycle. And we'll be the leading capital and trading hub that enables sustainable finance and credible solutions. So we'd like to thank our stakeholders and shareholders for being on this journey with us. The journey continues and exciting times lies ahead. With that, I conclude my presentation and invite participants to ask any questions that you have. And I have my management team with me. I'd also like to introduce Pol de Win, which you can see on your screen, Pol is our new Head of Global Sales and Organization (sic) [ Head of Global Sales and Origination ]. He joined early July and spent 20 years at Goldman Sachs. Thank you.

[Operator Instructions] First question from Gurpreet Sahi from Goldman Sachs.

I have 2. If I may, please, go one by one. The first one is on the cost side. So Yao Loong walked us through the cost. It seems like costs can rise nearly 9% or 10% this year. How confident is the management around the revenue side, given it's subject to volume and market price movements, that this year, we can still have some growth on the earnings? So that's the first one.

Yes, let me take -- thanks, Gurpreet, for the question. Yao Loong mentioned the provision of additional $10 million for BidFX. So clearly, they have outperformed our original expectation of the revenue. There has also been a good momentum in terms of the increase in active users. And third, there has been good cooperation synergies between our sales organization in cross-selling. Some of this obviously take a cycle of 3 to 6 months, but there have been cases where we've onboarded new clients onto the platform. And depending on when we close the acquisition of MaxxTrader, we like the technology. We like the client base that they have, and that it would just give us a holistic platform to offer clients access into the FX market, which is clearly an equally important and continues to grow as an asset class. So the momentum is there.

Okay. And then the follow-up is on dividend. The bring back of the scrip, we acknowledge that it's not for this fourth quarter dividend. But then given that there have been 3 transactions and going back to what we were discussing when the MaxxTrader acquisition was being discussed, 3 transactions, the leverage is raised, although it's very comfortable compared to peers and you have a very good credit rating. But does this a signal to us that the management wants to keep some earnings in-house after doing these things? So what's your view, Boon Chye, on -- how should we think about, in the very near term, incremental bolt-on acquisitions if opportunity does arrive? And I'm thinking more like 6 to 12 months.

Yes. So on the scrip dividend sales, let me reiterate what Yao Loong said. The business is very cash generative. If you look at the balance sheet, the free cash flow increased by almost SGD 150 million, I mean net of payment of all the expected dividends for the financial year. And we are continuing, obviously, to offer 100% cash as dividend for the shareholders. And looking at even if we do fund MaxxTrader 100% on debt, it is still a healthy 1.1 ratio on leverage. This gives us sufficient room if we were to take on further acquisition. But I think what is important is acquisition has to have a strategic fit. It has to, in areas, add new capability, new capacity in terms of clients, and we're comfortable from our businesses and the strong balance sheet to be able to look at different sources of financing. That is just one area, and there's still a lot of room that we can tap if there are interesting opportunities that could scale. And obviously, that will add revenue and that also depends on the potential target in terms of the cash-generating capacity.

And finally, just checking that the next dividend raise cannot happen before the fourth quarter of next year. That's right, that's correct? Or within the -- as you report first or second quarter also, there is a scope to raise dividend.

If you look back the last call it, 5, 10 years, you've seen how our dividend history has been. That's been increasing steadily. And as we said, we like to pay a growing dividend in line with the gross prospects -- minimum growth prospects of SGX. And I hope we've demonstrated a track record not only in this dividend, but growing the scale and breadth of our businesses.

Thanks, Gurpreet. So next question is from Ruiwen Lim from DBS.

I have 2 questions. The first question would be that would you be able to guide us through your thought process about how earnings may actually grow on a more sustainable basis from here given that, I guess, market appreciates the effort by management to bring in growth engines to kind of grow the FICC revenue. But we are also against kind of a more volatile on derivatives of revenue that might be more unpredictable. So any thought process about this earnings trajectory in the next 3 to 5 years would be helpful. Second question, by any chance, are we even thinking about a discount on the scrip that you are considering?

Okay. So -- go ahead.

Yes, I'm just going to take the second question first. I think it's premature to talk about the discount. We have yet to decide the timing of the scrip dividend. But if you look at precedents where different issuers have issued scrip dividend, I think you can see that the discount rates do vary. Some are from 0% to 2%, and then some are clearly in the higher end of the range, closer to 10%. What I believe is that we have an attractive growth story. And what we are providing is an option for investors to participate, in a very cost-effective way, to reinvest and grow together with us. So it's a total return story. And so my view is that we will be likely closer to the region where the discount is at the lower end. But again, that is something we have to decide because it's about a total return earnings story. It's not about shoring up our liquidity needs.

Thank you for the questions. Maybe let me start off with the point that Yao Loong was mentioning at the start of the results briefing. If you look at the underlying businesses, it actually grew 7%. And obviously, low interest rates had an impact on treasury income, and that is 100% margin. Every single dollar of treasury income drops to the bottom line. So we can talk about a low rate environment. But the flip side of it is the lower environment really means investors have to find means and other sources of return. And as the markets now talk about and has a divided view inflation expectation. Is that transient? Is it permanent? And we also have Central Bank officials in particular in the U.S. now talking more about when is tapering, right? It's the first site, going to be in September -- sorry, not September, in 2023. So that really means the assumptions on certain interest rate trajectory. But I think more importantly to your question, how do we see earnings revenues on a medium term basis. There are a few areas. So the core underlying is strong. And we'll continue to grow that with strong discipline on cost management. And if you look at the FX market, we are now putting together 2 OTC platform that has combined clientele of the buy and sell side and also a pricing and risk management solutions for participants on the platform. And the FX market, if you look at the BI survey, has been growing for the last 20, 30 years and continues to grow. And if you're investing in Asia, the FX component is a consideration not just purely in terms of hedging, but also in terms of a potential return as an asset class. So we see good momentum in that. And as we put the platforms together with a broader client base, our outreach will be growing. And then two, in Scientific Beta, not only do they have a strong core offering of smart factor strategies, the addition of climate solution will be the extra pillar that asset owners will look at. An AUM or AUR as under replication is pretty sticky over a medium-term cycle. And I think that is something that not only will allow the revenue to continue to grow, but also allowing us to find synergies with our very own IH in terms of launches in thematics with asset managers in ETFs. And also building on the fixed income platform strength, which no doubt is largely listings today, we hope to launch the TrumidXT platform in the months ahead, and we're seeing at least continued traction the SB market, the new platform, with the general counterparty capability. Then obviously, not forgetting that in our equity business, we demonstrated the strong portfolio and network effect of how we could retain, not only just retain liquidity but grow new liquidity. That's why I took a little bit of time to try and explain the launch of the Asia ex Japan net total return product. Starting from 0, we have been able to grab and gain market share. I hope that answers your question.

Next question from Nick Lord from Morgan Stanley.

So a couple of questions from me actually to return to 2 things we've discussed. First of all, on the scrip and I hear everything you say about -- I think this is my [ reader basis ], but this is for investor convenience rather than for your own cash flow needs. So I guess 2 questions related to that. First of all, would you consider buying back shares to neutralize the impact of the scrip? And secondly -- or do you sort of after 3 or 4 quarters of offering the scrip, and you know roughly what the scrip take-up is, do you use that as a way to push up the dividend so that the cash flow as a percent or the cash impact as a percent, it would have been otherwise. So just asking about how you manage that extra cash, you would say, from the dividend. And second, just on the cost. I mean, you obviously flagged at the investor presentation that cost growth would be higher going forward, and there's investment taking place that you need to do and that's why the costs are higher. And I guess relative to expectations, the step-up in the costs for 2022 is higher than people were expecting. So are you just trying to front-load this investment such that we return to a more normal cost growth phase in '23? Or how should we be thinking about the sort of the projection in terms of costs in '23 and '24?

Nick, thanks for the questions. I'll take both questions. I think first, we spent quite a lot of time a few weeks ago to talk about medium term, right? Because as we are at the results, we tend to focus on a year-on-year. We are investing in growth, and that's why you see significant expenses in FY '21 and FY '22. And this will lead to revenue outperformance. And so this will scale up our margins. And so over the medium term, we have clearly stated that what we expect expense growth to be will be in the mid-single digit region. And the margins, as a result of that, will scale back to the levels that we see in FY '22, which is closer to 62% for EBITDA margin. So that, in a way, shows the investments as we grow and we get the revenue that will impact the margins and improve the operating leverage of the overall business. And one thing that I'd like to point out is also that the quality of the revenue profile as we grow, driven by FX and a few other things, right? The combination of the nonequities business, which is FICC and DCI, will constitute a larger part of the overall revenue share closer to 40% over the medium term. In terms of the scrip dividend, we are in a growth mode, right? So, again, the scrip dividend is to allow shareholders to participate in our medium-term growth journey, where they believe that by reinvesting their dividends, their cash dividends, they can participate in the overall total shareholder return or higher earnings growth. So it would actually defeat the purpose if, on the other hand, if we do a share buyback on the other hand. As for the future direction of the cash dividends, I think the commitment that we have articulated remains, we will pay a growing and sustainable level of dividends based on the earnings profile of our business, which we expect to grow over the medium term. So that remains unchanged. As I said, a scrip dividend is to allow shareholders to join us in this journey, and it is a cost-effective way of doing so.

Can I just sort of come back? I mean on both those points. So on the last point on share buybacks. So when we think about dividends going forward, should we be thinking about cash dividend pay relative to cash flow or dividend declared relative to cash flow? So if I'm looking at cash flow cover our dividends, will I be looking at the cash versus cash, i.e., what you actually end up paying out, or should I be looking cash versus declared?

Sorry, Nick, can you clarify? Can you say that again?

Obviously, you're going to have a dividend, yes, which will be X cents per share, $0.32, yes? And we can look at that -- we typically look at that as cash flow cover of the dividend to see how affordable that dividend is. But let's say that you end up having a [ 40% ] scrip. Then -- and if I look at other companies who have a script dividend, within a few quarters, you can have a pretty good guess as to how much a scrip take-up will be on a REIT because it tends to be reasonably consistent and you can flex discounts to increase or decrease that. So when you're thinking about your dividend payment, would you be thinking about the declared dividend relative to your cash flows or what you know by modeling it would be the cash outflow from your dividend relative to your cash?

The dividend, the cash dividend that we will be thinking about is independent on the scrip dividend and the take-up rate because that's at the election of the shareholders. What -- so some shareholders will take up and some would not. So for the cash dividend, we remain committed to the policy and that will be independent of the take-up rate of the scrip dividend scheme.

Okay. So you will take into account the take rate when setting the cash dividend or when setting the declared dividend.

No, I'm saying that, that -- those 2 things are independent.