Singapore Exchange - RHB Invest 2020-06-30: Acquiring BidFX To Serve Wider FX Community


Singapore Exchange - Acquiring BidFX To Serve Wider FX Community

  • Singapore Exchange has announced that it will acquire the remaining 80% in BidFX for USD128m, which will expand its reach into the global FX over-the-counter (OTC) market. We view the acquisition positively.
  • Stay BUY, unchanged SGD9.20 Target Price, 14% upside with c.4% FY21F (Jun) yield. Our Target Price is pegged to 24x FY21F EPS, at 1SD above the 4-year mean of 22.5x.

Synergies led to SGX’s decision to purchase the BidFX stake.

  • Singapore Exchange (SGX:S68) first acquired a 20% stake in BidFX in Mar 2019, to bring together FX futures with OTC markets. The synergies between SGX and BidFX – plus the opportunity to support international FX participants from pre-trade data and analytics, trade execution to post-trade clearing – propelled SGX to purchase the remaining stake. It expects to complete the acquisition in July.

57% CAGR for average daily volumes since Jan 2017.

  • BidFX is a leading cloud-based FX trading platform for institutional investors. Since BidFX’s establishment in Jan 2017, average daily volumes have grown at a compounded annual growth rate (CAGR) of 57% to USD31bn in May 2020.
  • BidFX continues to acquire new clients, with over 100 of the world’s largest banks, hedge funds and asset managers currently connected to its platform.

SGX to serve a wider FX community with the acquisition.

  • SGX sees the future of FX being in market participants benefitting from price discovery, liquidity and transparency for both OTC and listed futures trading, in a single unified venue. BidFX is ahead of the curve in developing sophisticated electronic FX trading and workflow solutions. SGX can serve a wider FX community, with BidFX as part of the SGX Group.
  • SGX indicated that BidFX has revenue CAGR of > 60%, and has been EBITDA-positive from 2017 until 2019.

No material impact on SGX’s FY21 financial results.

  • Note that SGX also indicated that the acquisition should be EPS-accretive from FY21, and we have fine-tuned our FY21 projections.

Respectable dividend yield.

Global economic fluctuations and geopolitical developments are key risks.

  • If the COVID-19 pandemic is prolonged, trading volumes could experience a gradual decline from current high levels.

Leng Seng Choon CFA RHB Securities Research | 2020-06-30
SGX Stock Analyst Report BUY MAINTAIN BUY 9.200 SAME 9.200