Singapore Exchange Limited (S68) Earnings Call Transcript & Summary

All right. Good morning, ladies and gentlemen, and to also those who are watching this session via webcast. Thank you for joining us today to discuss SGX FY 2024 Financial Results. The session today will begin with a presentation of our financial highlights by Ng Yao Loong, our CFO, followed by a business update by Loh Boon Chye, our CEO. There will also be time for questions and answers thereafter. But please be reminded, for those of you asking questions, do identify yourself. So, it is now my pleasure to invite Yao Loong on stage to deliver our financial highlights. Yao Loong?

Well, a very good morning and thank you for joining us on the eve of National Day. So FY '24 performance. I would say, it was stable in both revenue and earnings growth. So group revenue was up 3.1% to about $1.23 billion, driven by the strong growth of currencies and commodities. On an adjusted basis, our expenses increased 2.5% to $604 million, while group earnings increased 4.5% to $526 million. Our operating profit margins and earnings margins improved 0.3 percentage points and 0.6 percentage points, respectively. Now, let me run through the details of our financial performance. So, as mentioned earlier, revenue growth was mainly driven by currencies and commodities, which collectively grew 23% year-on-year. Our derivatives franchise, which is a chart on the left comprising equities, commodities and currencies, futures and options, and the associated treasury income, or TI, is about 45% of total revenue. So the revenue from our derivative suite grew about $12 million or 2%, driven by 8% growth in volumes. Lower revenue growth is in part due to how we account for the GIFT Connect fee arrangement. Royalty used to be paid in FY '23 and it was accounted for as an expense item. Subsequently, we replaced it with a fee arrangement, which is netted off against the trading and clearing revenue. TI or treasury income was marginally lower against a year ago. If we exclude that, our group revenue growth would have been slightly higher at 3.6%. Now, contributing to the higher derivatives growth was clearly the growth in our trading and clearing revenue. So we saw currency futures, DAV grew 35%. Commodities DAV also increased by 50% given our efforts in broadening participation in our INO contracts. Equity derivatives declined in terms of DAV 7%, mainly due to the lower Nifty volumes as we migrated our members and clients to the GIFT Connect. If we exclude the nifty volumes, the DAV decline would have been 3%. Now, OTC FX business we saw healthy growth. ADV increased 47% to USD 111 billion, which exceeded our target of USD 100 billion early. The ADV increase was from higher swaps activities. We saw financial institutions managing their interest rate risk enhancing their capital efficient given the volatility in the markets. Now, revenue-wise, OTC FX grew 22%. It's now about $92 million. So it's 7.5% to our group revenue compared to 6.3% a year ago. Capital raising cash equity markets activity-wise remains subdued as economics and uncertainty impacted investor's appetite for new investments. The SDAV declined 4% to $1.06 billion on a year-on-year basis. Now, just a reconciliation between our reported earnings, which is almost $600 million to our adjusted earnings $526 million. What you see in the middle is a bunch of noncash adjustments, which I will highlight or elaborate. So first on the left, we saw a net fair value gain of just over $100 million, mainly from our investment in a private equity fund managed by 7RIDGE, which holds 1 single asset trading technology. So, reflecting the continued strong operating performance of TT. Our investment in this fund was revalued upwards by $92 million this year. Previously, in the previous FY, the investment was revalued upwards by $40 million. And this fair value adjustment flows through our P&L given its accounting classification. Now, second, the performance of Scientific Beta remains subdued relative to our expectations. Hence, we wrote back the accounting gain in our forward liability, which relates to a put and call option with EDHEC to acquire the 7% stake which we don't own. We also took an impairment charge of almost $9 million this year relating to the purchase intangible assets in Scientific Beta relating to know-how and customers. Third, there were other impairment losses, including a $10 million impairment for the cessation of operations of our fixed income trading platform or Bond Pro. Now, our fixed income focus is on short-term interest rates right now as we launch the futures to support our customer's demand for more risk management tools in this area. So we launched the futures linked to SORA, which is the Singapore Overnight Rate Average, and TONA, Tokyo Overnight Average Rate just recently. Finally, we also set aside $8 million as a provision to fund a $10 million initiative to improve the vibrancy of our securities market. The monies will be channeled to our industry partners for initiatives that can help and improve market vibrancy. This could include areas like growing distribution channels for investor outreach, new services to enhance or engage investors and support the expansion of our product shelf and regional connectivity. So this money set aside will be over and above our ongoing BAU investments in the securities market. Now, back to revenue across our 4 operating segments, which appears on our financial statements. So starting with FICC on the left, it now accounts for 26% of our total revenue. So it's comparable to the revenue contribution from both equity derivatives and equities cash. As I mentioned 2 years ago, that we expect this segment to grow in terms of revenue at the mid-teens percentage range over the medium-term. It has, in fact, grown more than 20% per annum in the last 3 years. So volume growth for all our key asset classes in this segment was very strong. As I mentioned, currency futures DAV was 35% growth, OTC FX was 47% and iron ore grew 52% in terms of DAV growth. Now, moving on to equity derivatives, revenue decreased by 8%. It still accounts for about 27% of total group revenue. And the decline in the T&C or trading and clearing revenue was driven, as I said, by a decline in the derivatives volume from GIFT Nifty and also our Nikkei futures, partially offset by higher volumes in our Taiwan index futures contract. And again, if we exclude Nifty, our trading and clearing revenues would have increased 0.5%. On a pro forma like-for-like basis, our average fee for all our derivative suite declined marginally from $1.56 in FY '23 to $1.54. Again, this relates to the accounting adjustments I mentioned earlier. And so, actually, what you are getting is a like-for-like comparison. As for the cash market, revenue was down 2% due to a 4% decline in our securities traded volume. It continues to contribute 27% of our group revenue. The decline was primarily driven by lower trading activity in the REITs, and the small and mid-cap stock segments. Overall, securities average clearing fee remained comparable at 2.49 basis points. Our platform revenue was up 6% due to growth across market data, connectivity, Index Edge and others. This segment is about 20% of our total revenue. So, we saw growth from a combination of volume, i.e., on-boarding new subscribers of colo and market data and also, repricing of these services. Now, I wanted to share view on a half-on-half basis. Usually, we just look at it from a year-on-year basis. So you can see there's actually strong double-digit percentage momentum in volumes across our major asset classes. And that has sustained in July as well. We released the monthly statistics today together the results. So on the left, derivatives business saw a DAV of $1.17 million contracts in the second half of this financial year. It is actually the half -- highest half year DAV since our listing. We saw investors managing their risk exposures to Asia, including China, given a more volatile geopolitical and macro environment. So across derivatives, the DAV growth was in the low- to mid-teens or in the high-teens percentage. So in the equities, DAV was up 11%, commodities 15% and the exchange traded currency futures was up 17%. And then when we look at the OTC FX, the ADV grew 23%. So for second half it was $123 billion. Cash equities, likewise SDAV grew 21% to about $1.16 billion. As I said in July, we saw continued momentum in these numbers. Now, from FY 2025, we will implement an accounting change. So that doesn't affect what you see in terms of the fundamental or the underlying earnings. And this is how we look and it's more aligned with how management looks at the underlying economics of our transaction businesses, especially in derivatives. So going forth, transaction-based expenses, or what we classify as processing and royalties, will be moved from the expenses side to be netted off against operating revenue to derive net revenue. I think you can see the pro forma on the left using FY '24 numbers. This will actually facilitate better comparability with major global derivatives exchanges as they also adopt a similar accounting practice. So with this change, the calculation of the securities and derivatives average fee per contract will also change. We will now reference net revenue instead of operating revenue. And naturally, that will be lower. So, again, I've given you an example of the FY '24 numbers. So the average clearing fee is $1.54. And just by virtue of this accounting change, the fee will be at $1.31. But nothing else changes. In fact, every line item still appears where you will see it and you can form your own conclusion. So, again, I emphasize this is how it reflects how we look at the net revenue after the royalties. On the expenses side, adjusted expenses was up 2.5%. It was lower than what I guided initially. So really increased from higher staff costs. Again, we have the merit increment and we also had a bit of an increase in our headcount, around 4% to support the growth of our OTC FX business. Technology-wise it was up 3% in terms of expenses from higher system maintenance. Royalties declined 5% but that's mainly due to the absence of GIFT Nifty royalties. We actually saw higher iron ore royalties in this segment. The adjusted expenses is about 3% lower than reported expenses because it excludes 2 items. One, the amortization of purchased intangible. This is what we have been doing since we introduced this metric, and then the other one which I've mentioned, the $8 million that we set aside to fund the securities market for our partners. Now, looking at in forward sort of FY '25, in the near-term, we do expect the expenses to grow 2% to 4%. I've just mentioned about the accounting change. So when we look at expenses-wise, this will exclude transaction-based expenses, which is in part volume driven. So I think that's a better reflection of our forecast of our expense base. And we'll manage this expense base by growing headcount at a more measured pace and, of course, improving operational efficiency and realizing savings from the completion of the migration of our OTC FX data center. Going out a little bit longer over the medium-term, I do expect that the organic expense growth to remain in the low- to mid-single-digit percentage range. As for CapEx, we incurred $66 million in FY '24. I'm guiding to a range of $70 million to $75 million in FY '25 as we invest in the modernization of our security system and also infrastructure upgrade. I've mentioned quite a few times that our CapEx would appear to be on uptrend, given the typical refresh cycle for major systems. We will continue to invest in the modernization of our exchange, trading and clearing platforms and also our data center. But we expect CapEx over a cycle to remain below the historical average of 7% of group revenues. Balance sheet remains strong. Healthy leverage ratios if you look at the charts on the right and left. Interest coverage ratio, not an issue. We, in fact, reduced our gross debt by about $50 million when we refinance our convertible bond, which matured in March 2024 and we issued a Sing dollar corporate bond. And as a result of the refinancing, we do not have any debt maturing until FY 2027. The Board of Directors has proposed a final quarterly dividend of $0.09 per share. So if it is approved at our upcoming AGM in October, this would bring the total dividends for FY '24 to $0.345 per share. So this $0.5 increase in quarterly dividend from $0.085 to $0.09 represents an annualized increase of almost 6%. And this is in line with our stated aim to increase dividends per share by mid-single-digit percentage growth in the medium-term, subject to earnings growth. Now, with that, let me hand over to Boon Chye, our CEO, who will deliver the business update.

Good morning again. Thank you for joining us. As you heard from Yao Loong, overall, the group delivered a set of results that demonstrates the resilience of our business. As you can see from this slide, the 2 pie chart, our multi-asset strategy has yielded positive results over the years. The diversified revenue profile of business today is the result of our strategic growth initiatives within the currencies and commodities space combined with the resilience of our equities business. Back in FY 2016, when we first started building up various asset classes, the equivalent of today's FICC segment contributed a small proportion of our total revenues as seen in the dark blue segment of the pie chart on the left. Eight years on, our FICC business has grown to account for about 26%, or over $320 million of revenues. Today, FICC equities, cash, equities derivatives collectively made up 80% of our total revenues, and each contribute an almost equal proportion to our business. Our platforms and others businesses, which include revenues from market data, connectivity, Baltic Exchange, Energy Market Company contributes a robust 20% to group revenue. We remain well poised for further growth from our multi-asset strategy. Let me now unpack our FICC segment, which has delivered mid-teens percentage growth in the last 3 years. In SGX FX, our combination of listed FX futures and OTC FX across the full suite of workflow and matching services solidifies our position as a leading gateway to the global FX market. Since we embark on building an integrated FX franchise in FY 2021, our combined OTC and FX futures average daily volumes, or ADV, have increased 2x, twofold. This year, we maintained the growth momentum for our currency derivatives, achieving 36% growth in total volumes. Open interest across listed FX futures gained 76% year-on-year and we retained our position as the leading venue of choice for both international, RMB and the Indian rupee futures. In June this year, both our RMB and rupee futures achieved their highest single day open interest record at almost USD 22 billion and USD 7 billion, respectively. We see this momentum continuing through the start of the new financial year. Just this week, on Monday, amid market volatility across global markets, our RMB futures registered a single day volume record of over USD 35 billion in notional value, our highest ever. We have also made inroads in other key Asian currencies, particularly in our Korean won and Thai baht futures where we saw healthy volume growth. There is an increasing demand from our clients for transparent and liquid tools to effectively manage their Asian currency exposures. In OTC FX, we have set a target of achieving USD 100 billion ADV by 2025, FY '25 or earlier. I'm pleased as you heard from Yao Loong earlier to report that we've well surpassed this target in FY '24 with a 47% growth in ADV to USD 111 billion. Our SGX Commodities franchise continued to grow from strength-to-strengthen as seen from the robust sustained growth over the past 3 years. Total commodities volume has more than doubled since FY 2021, while year-on-year growth has been a commendable 50%. In yet another record year for iron ore volumes, we saw wider client adoption across the U.S. and Europe on the back of our efforts to enhance participation during U.S. and European trading hours and provide round-the-clock trading. Iron ore has emerged as a global commodity given its high correlation with industrial growth and infrastructure development. As iron ore becomes a significant trade and economic indicator, much like oil, our iron ore derivatives will become an important part of the institutional investors portfolio. Our deliberate efforts to deepen and diversify the ecosystem by including more financial market participants has resulted in an increasing proportion of screen trading for the contract. Today, volumes of our iron ore contracts have reached more than 3x that of the underlying physical seaborne market. We saw strong growth, volume growth in our freight suite 2, which is another key barometer for global trade. As the world's largest dry bulk FFA marketplace, we will strive to harness the synergies of integrated cargo and freight risk management. The increase in volatility and market risks arising from geopolitics and weather patterns have contributed to freight rates becoming more volatile than ever. This could increase risk management requirements using our freight and iron ore contracts, especially given that iron ore is the most commonly shipped dry bulk cargo worldwide. Beyond our flagship contracts, we have seen healthy volumes across the entire commodity suite. Rubber, rubber derivatives volume were up more than 60% in FY '24, exceeding the size of the physical market for the first time at 3.5 million lots. This was largely driven by stronger hedging demand from improving market fundamentals, higher participation from financial traders, as well as growing interest from European and U.S. clients. This marks the third year of our partnership with New Zealand Exchange. Together, we have expanded the ecosystem of physical and financial participants who recognize our dairy product suite as a benchmark for seaborne dairy market globally. FY '24 dairy derivatives volume were up 31% year-on-year with a steady annual growth rate of more than 30% for both volume and open interest. Moving on to our other derivatives products, notwithstanding the dip in total equity derivatives volume in FY '24, SGX is still the main international and efficient venue for accessing key Asian economies. Our pan-Asian equity derivative suite provides global investors with a single gateway to access Asian economies. A shift in monetary policies, elections-led volatility and the global AI semiconductor thematic have been driving investment flow. The latter led to record single day volumes for our flagship FTSE Taiwan contracts and we saw open interest growing 7% to 955,000 contracts. Open interest for our SiMSCI futures also rose to 212,000 contracts, close to a record level last seen in October 2022. With a new global interest rate macro environment, we saw the potential to develop a short-term interest rate product suite. At the end of July, we launched interest rate futures linked to Singapore and Japan's overnight interest rates. This augment our existing share of Singapore and Japanese derivatives, enhancing our multi-asset proposition. The launch of our Tokyo Overnight Average Rate, or TONA futures has been quite timely given the tightening of Japan's monetary policy and recent market volatility. There has been a good initial success in our TONA futures, as well as an increase in activity in our mini-JGB futures. On the securities front, we further expanded our Thailand-Singapore depository receipt linkage with 5 new Singapore DRs. Collectively, we now have 8 DRs with underlying Thai blue chip companies, which make up more than 40% of the SET benchmark index. Retail interest in the DRs have been growing with net inflows increasing 5x since the launch. The pipeline of DRs on the link is robust. Singtel's DR is the latest to list on the stock exchange of Thailand in April. We see healthy trading across the DRs listed in Thailand and are seeing further opportunities to grow the pipeline. Besides DR, we also launched our first actively managed ETF in January this year, offering investors exposure to a diversified portfolio of Japanese companies. We're continuing enhancing our product suite such as expanding our structured certificates to include other underlying markets. Turning to China, where we have a comprehensive and liquid suite of products. Given our unique position as the nexus between China and ASEAN, along with our multi-asset offering, there are many opportunities for us to capitalize on cross-border fund flows and the internationalization of China's financial market. The revival in interest and growth prospects of China boosted open interest of our flagship FTSE A50 contract through the second half of FY '24, with open interest hitting an 18-month high of USD 12 billion in May. Our FTSE H50 contract, which has a higher concentration in higher yield growth technology stocks, similarly saw volume growth of close to 50%. Combined, our A50 and H50 contracts offer broad capital-efficient access for investors looking to calibrate their exposures across different sectors. Complementary to our Chinese equity derivatives are RMB futures, which registered a significant increase in volumes and open interest by 50% and 65%, respectively. The ability for our customers to achieve capital efficiency across a comprehensive range of asset classes, including our iron ore and freight offering is one of SGX competitive advantages. In the area of cross-market connectivity, our ETF links with the Shenzhen Stock Exchange and Shanghai Stock Exchange are one of the most successful mutual ETF product links between China and other international markets. To date, we have listed 7 ETFs under the link with a combined AUM that has grown 9x to SGD 290 million as at the end of July this year compared to a year ago, while exploring opportunities in regional equities or yield focused products in line with investors' demand and interest. With the growth of the Indian economy in recent years, we are well positioned to build upon the success of our GIFT Connect. The ability of GIFT Nifty futures, Indian Single Stock Futures and Indian rupee futures on SGX enhances capital efficiency for clients who want to manage their exposures in India through a single clearing house. Trading of our GIFT Nifty futures has grown steadily since the start of the full scale operation in July last year. I'm pleased to share that open interest in our GIFT Nifty contracts has grown to 39% since migration to now about 271,000 contracts with notional open interest growing 73% to USD 13 billion. We saw a healthy 16% growth in volumes on a half-on-half basis and are on track to achieve pre-migration volume levels in 2025. We will seek to deepen our collaboration with the National Stock Exchange of India and explore opportunities that will drive mutual success, including the development of new products for GIFT Connect. With rising interest in Indian stocks, our Indian Single Stock Futures suite also achieved new milestones with notional open interest hitting a record of USD 1.3 billion in June this year. We'll look to facilitate risk management efficiency via our Indian Single Stock Futures and GIFT Nifty futures. Our Indian rupee futures contract complete the waterfront for India access against the backdrop of recent India elections, our rupee futures achieved a doubling of notional open interest. We expect to remain the venue of choice for international rupee futures going forward. Looking ahead, we aim to grow group revenues, excluding treasury income, between 6% to 8% CAGR in the medium-term, driven mainly by low- to mid-teens percentage growth in our OTC FX and exchange traded derivatives businesses. Our revenue CAGR over the last 3 years was lower than our previous guidance of mid- to high single-digit due to a slower cash equity business coupled with the underperformance of Scientific Beta. As a multi-asset exchange, we remain committed to our cash equities and indices businesses. The stock market is an important pillar of Singapore's financial ecosystem. We will work with a review group established by MAS on market and regulatory initiatives that could structurally improve the liquidity of our stock market. The success of our DR linkage with Thailand has laid the groundwork for greater collaboration with other ASEAN exchanges using depository receipts. We've inked MoUs with the Indonesian Stock Exchange, and most recently with the Vietnam Exchange. SGX will continue to foster close ties with our regional partners to expand access to regional investment opportunities. We expect our Commodities and Currency franchises to play an important role in future growth. Leveraging on our market leadership in both iron ore and freight derivatives, we will assess opportunities to offer an integrated solution for clients to manage bulk cargo and freight risk on a single capital-efficient platform. We will further tap on the growth opportunities in our integrated FX franchise. OTC FX currently contributes about 3% to our group's EBITDA. We aim to grow this to a mid- to high single-digit percentage of group EBITDA in the medium-term. Further upside, in OTC FX contribution to our bottom line, could come from our efforts on scaling client acquisitions in Europe and Asia Pacific and cross-selling across geographies. At the same time, we'll optimize our expenses by integrating our distribution functions and technology platforms. We look forward to further advancing our position as an international multi-asset exchange. Thank you very much for your attention. With that, I conclude my presentation and invite my colleagues to join me for the Q&A.

Nick?

It's Nick Lord from Morgan Stanley. Two questions, actually. The first is just on the MAS-sponsored review of the equity market. And I wonder if you could talk a little bit about -- I mean, you've had a lot of experience, obviously, in trying to get volumes up on the Singapore Stock Exchange, and it's obviously a difficult thing to do. So, I just wonder if you could give maybe your initial thoughts on what could be different with, as you say, a whole ecosystem approach, as opposed to SGX trying to do it on its own. So I'd be interested if there's a silver bullet out there that you can think of. And then secondly, if you could just talk a little bit about trading technologies, because obviously, quite a large part of your NPAT came from the revaluation of trading technologies, or the surprise, I guess, in the NPAT. So what is it? How are you valuing this? How is that sort of you said it's an improvement in operating profit, but I'm just interested to know what exactly is driving the revaluation. And could you just talk a little bit about what trading technologies does -- is it primarily supplying stuff to you? Or is it sort of a broader sort of business, and therefore, again, trying to work out sort of the basis for the revaluation, if you like?

Yes. So maybe I'll take the first question and then let my colleagues elaborate a little bit more on what does trading technology do and give you a sense of the upward revaluation. So look, first, we were not -- and we can't preempt what the review group will do. If you look at the efforts over the last couple of years, there has been obviously creation of pre-IPO fund to invest in IPO companies. There's obviously been efforts to broaden and deepen the research ecosystem and also our own efforts on regional retail outreach. So many initiatives has been done. I think what is important is for the overall ecosystem to come together. And this would not just involve a regulatory review. It will have to look at what makes the stock market more liquid. So I would reckon this is not just on the supply side. I think demand for stocks on the stock market and obviously active, constant price discovery, which would also enhance liquidity. But look, the group has just been formed, SGX will be part of the group and the work stream. And we also welcome feedback as we engage the broader ecosystem as inputs for consideration.

There's a link between, I suppose, the first and second question and the first question. The reason the ecosystem is involved is because as exchanges we're B2B2C businesses. So we need to make sure that the intermediary businesses are sufficiently well connected and sufficiently well lubricated so that we can connect fully to the end customer base, particularly the end institutional customer base. So what does TT do? TT is a pretty old business, a couple of decades old. What's happened more recently is that, as global users of futures products have become deeper, they're more universal, they've had to work with intermediary software providers to connect to a global network of quite different futures exchanges, Chinese exchanges, Indian exchanges, SGX as an example. And they typically want comprehensive coverage and they typically want software which works more as SaaS and possibly less as self-managed service. So we work with TT primarily and have done for a long time as a business partner. So they were literally the first for us to connect GIFT to our end customers. So the connectivity comes in 2 ways. They have to send data out reliably at high speed and they have to send orders in, right? So it made a great deal of sense when the deal came out and it fell through because Goldman's tried to buy it, every other bank in the world said, well, we can't have 1 person own this vital network. So CBOE and SGX viewed as friendly accommodative partners, were asked to, I think, get involved in this one. So we've done many things directly with TT in the past, we'll continue to do so. But it's also turned out that their business has expanded massively and that accounts for their stand-alone revenue growth.

I'm [ Jovi from DBS Singapore ]. So 3 questions here. My first, could you just provide more color on the $8 million onetime provision towards the securities market initiatives? What are these initiatives? And could they become a recurring expense in the future? Yao Loong mentioned there's certain partners earlier. And are these initiatives related to the new review group in any way? And maybe my second question here. On the review group that was announced, there are concerns about the composition of the group and private sector representation. So should brokers and remisiers have been a part of the group in your view? And finally, Yao Loong is transitioning to a new role as Co-Head of Equities. Could you provide more color on this shift? What does SGX hope to achieve with having 2 equity heads? And how are the tasks divided? And how is the search for the new CFO going?

Is that share price-sensitive? In fact, no. I'll let the CEO answer. But I think first, as I said, we have already -- we are already incurring a certain level of expenditure or expenses and investments to support our asset classes, including the securities market. So this $8 million to form a $10 million, because we have got a previous sort of provision that we have set aside forms that $10 million, and it is over and above what we will spend. And for us, clearly, as Mike and Boon Chye talk about, it's an ecosystem, it's not just about us introducing new products. We need the ecosystem, the brokers, the financial advisors and so on to be able to go out, talk to the clients, talk to the customers, right? So this is our attempt to say, look, this is a broader ecosystem. Let us work with you to expand the product shelf, the product shelf that we have for distribution for distribution, connectivity and so on. So this is, in a sense, that is one off. And why we have been able to do that is, because when we look at our expenses growth this year, we have actually been able to grow at a pretty measured rate. We were 7% to 8% last in the last 2 FYs and has come off. And so, we say, look, we could, of course, pay shareholders a little bit more, which we have done. Can we do something for our ecosystem? We will view towards enhancing the vibrancy of the entire securities market. And so, we have been able to then channel that additional savings that we have into this one-off fund to support the broader ecosystem.

So think about this in terms of engaging the ecosystem to try and grow distribution channels, reach out to more participants, new services, expand our production as Yao Loong has mentioned. I think you have a question around the composition representation of the review group. We, at the SGX Group, are in constant conversation as part of our engagement, our business development, obviously, with the brokers, with the security houses and views and initiatives from them has always been in constant dialogue, engagement and I think the review group will clearly also, I'm sure, have a wider engagement beyond just the composition and we will obviously represent what we hear, what is being suggested to us by the broader ecosystem. And your third question was Yao Loong himself.

Yao Loong working harder.

Well, yes, we have Yao Loong's replacement in place. He will transition to the equities role, which clearly worked with the existing team, which has done a lot to try and grow the liquidity of our stock market.

Timothy Goh from The Straits Times. Just building on what [ Jovi ] had asked. So, some stockbrokers that we have spoken to have expressed disappointment about the new review group, specifically concerns that the 12-month period is too long. What are your thoughts on this? And, I guess, you also mentioned something about -- you guys, you mentioned that SGX is constantly engaging with the review group to look at the feedback. Has SGX received any concrete feedback on the review group? If so, are you able to share what they are? The second question is, are you expecting more listings this year as compared to last year? If so, why? Third question, do you have updates to share on working with Anchor Fund @ 65? And is there a timeline for the 9 companies to list?

Okay. We -- on your first question, with or without the review group -- with the review group, obviously, it's a focal point to harness and garner views and suggestions. For us, I wouldn't say work have started. Clearly, work have started, but we have been continually engaging the market. But obviously now there is a visible review group. We, on our part, will clearly harness and engage with them in terms of what other ideas are there to try and improve the liquidity. And on the IPO front, I would say the following. Look, it's been clearly very low base for us in FY '23, FY '24. With the change in macro environment and what we have seen talking to companies, companies have started preparing for IPO on SGX. We clearly only had more catalysts in the last year in FY '24. I would say, we're now seeing main board potential listees making preparation. Mandates given out to professional and we hope market stays more favorable, more conducive but we've seen some of the U.S. numbers in the last 1 week. So all things have to be aligned, particularly, we've seen more mandates being actually booked up. With 65 Equity Partners, good partnership, constant dialogue. We meet companies, we introduce companies vice versa, but they are really investing into those 9 companies working with them. So there's not much I can glean into to give you a view.

So this question is from Harsh Modi from JPMorgan, it's about our capital expenditure. So with CapEx moving it up, likely we'll get higher OpEx in the next couple of years due to depreciation. So how should we look at OpEx going forward into the medium-term?

Okay. Well, I think Harsh, thanks for that question. So that's why we gave a medium-term expense guidance, low- to mid-single-digit over that period of time. We will have to manage our expense growth overall, right? So staff cost, as I said, it's almost 50%. Then there will be depreciation, there will be the SMR expenses and so on. So we look at this in aggregate. Yes, OpEx, sorry depreciation is likely to increase as we spend more CapEx but we just have to maintain that overall growth within the overall expense base.

With that, Harsh, I could add if you recall in FY '22-'23, our expense growth I think was in the 7% to 8%, yes, 7% to 8% and then FY '24, obviously, came down as you just saw. And back then we also guided a mid-single-digit expense growth. So, we're managing through a cycle. You may get some changes year-over-year.

There's a follow-on question from Harsh. This is about our dividends. So how should we think about the extent of DPS increase over the next 12 to 18 months? Is it going to be a gradual increase in absolute DPS? Or is there possibility of restoring payout closer to the payout ratio levels of about 80%?