1 Key Chart About Hong Kong Exchanges and Clearing’s Income

Hong Kong Exchanges and Clearing Limited (SEHK: 388), or HKECL, operates a stock market and futures market in Hong Kong.

The company has recently come on my radar as I’m looking for good companies to keep onto my stock watchlist.

Yet, before the company can make it to my watchlist, I need to carry out more research to understand the attractiveness of its business model, as well as its future potential. Here, I’ll look at one important chart that I found during my research process. See below.

Revenue breakdown

Source: Hong Kong Exchanges and Clearing Investor Relations

The above is a quick overview of HKECL’s revenue for the last seven years. Here are three things we, as investors, can take away from it.

Firstly, the company generates income from mainly six categories, namely Clearing, Equity and Financial Derivatives, Cash Equity, Commodities, Platform and Infrastructure, and Corporate Items.

Secondly, the three biggest segments (Clearing, Equity and Financial Derivatives, Cash Equity) accounted for more than 85% of its revenue in 2018.

Finally, revenue has grown from HK$7.2 billion (US$923 million) in 2012 to HK$15.9 billion in 2018. This translates to a total growth of 120%, or a compound annual growth rate (CAGR) of 14.0%, in revenue for that period.

Key Foolish takeaway

Overall, there are a number of moving parts here. Yet, by understanding the different sources of income, as well as the revenue trend for HKECL, investors will be better-positioned to understand the company’s overall business model.