Singapore Exchange Limited - Phillip Securities 2017-10-17: Strong Start To FY18

Singapore Exchange Limited - Phillip Securities 2017-10-17: Strong Start To FY18 SINGAPORE EXCHANGE LIMITED S68.SI

Singapore Exchange Limited - Strong Start To FY18

  • Expect strong SDAV and DDAV to continue in FY18 (FYE June) on the back of synchronous global recovery, peppered with regional volatility.
  • Higher market capitalisation for large cap stocks in finance, consumer services (property stocks included) and technology brought SDAV higher.
  • Expect stronger performance from China A50, USD/CNH and INR/USD futures as changes in domestic regulation make SGX a favourable overseas trading platform.
  • Number of new IPOs remain lacklustre compared to peers and delistings have accelerated.
  • Expect SGX's total DPS to increase from previous S$0.28 in FY17 to S$0.32 in FY18.
  • Maintain Accumulate with higher TP of S$8.39 (previous TP S$7.63).


SDAV expected to perform as global economy and domestic property market improves.

  • Global equities markets have risen on the back of improving economic growth around the globe. This has benefited Singapore listed companies in the finance, technology and consumer services sectors. 
  • Property stock prices have also begun to rise as the domestic property market sentiments improved dramatically on the back of strong residential enbloc sales momentum. 
  • SGX's Average SDAV from July to September was S$1.16bn, higher than the preceding average SDAV of S$1.15bn from April to June.

Episodic regional tensions and regulatory changes help drive trading volumes for SGX’s foreign currency and equity index futures.

  • USD/CNH futures saw stronger traded volumes during heightened tensions in the Korean Peninsula. A replay of this tension could see hedgers drive up the USD/CNH traded volume.
  • At the same time, regulatory changes in China and India have encouraged market participants to approach SGX as a platform to trade USD/CNH, INR/USD and China A50 futures.

However, new IPOs have not been able to keep pace with the number and size of companies slated for delisting.

  • The number of listed securities on SGX have been on a decline and there is a lack of large cap stocks with high free float to replace the delistings. A review on listing rules could address the falling number of listed securities. 
  • And we expect the delisting of Global Logistics Properties to have an impact on the securities traded volumes.


  • We are revising our FY18e SDAV to c.S$1.16bn from previous estimate of S$1.08bn as stock market capitalisation and trading volumes improve. We think that FY18e operating expenses could come in above the guided range of S$425mn to S$435mn as business activity picks up hence we estimate FY18e operating expenses to be c.S$440mn. Our estimates for FY18e total derivatives volume is also revised upwards to 187mn contracts (previous estimate 180mn contracts). 
  • We expect SGX’s 1Q18 revenue to come in at S$218mn and PATMI to be at S$93.5mn, up 12.5% YoY. We expect 1Q18 operating expenses to come in at c.S$109mn, forming 24.8% of our FY18e operating expense forecast.
  • Given the expectation of better overall performance this year, we expect FY18e total DPS to increase by S$0.04 from FY17 total DPS of S$0.28 to S$0.32. Maintain Accumulate with higher Target Price of S$8.39 (previous TP of S$7.63).

Jeremy Teong Phillip Securities | http://www.poems.com.sg/ 2017-10-17
Phillip Securities SGX Stock Analyst Report ACCUMULATE Maintain ACCUMULATE 8.39 Up 7.630