Singapore Exchange - RHB Invest 2020-08-26: Good Trading Volumes For July/August; Still BUY

SGinvestors.io

SINGAPORE EXCHANGE LIMITED (SGX:S68)

Singapore Exchange - Good Trading Volumes For July/August; Still BUY

• Singapore Exchange (SGX:S68)'s securities average daily value (SADV) for the first seven weeks of FY21 was SGD1.33bn, in line with our FY21F of SGD1.4bn. July’s derivatives average daily volume was also robust, driven by China A50 Index Futures’ m-o-m rise.
• SGX remains attractive, since the SADV could rise as more news flow emerges on the COVID-19 situation.
• Keep BUY with higher SGD9.50 Target Price from SGD9.20, 10% upside with c.4% FY21F (Jun) yield. Our Target Price is pegged to 24x FY21F P/E.

We maintain our SGX FY21 SADV assumption of SGD1.4bn.

• SGX's July SADV was SGD1.26bn, and month-to-date August was SGD1.43bn. We believe our SGD1.4bn FY21 (Jul 2020 to Jun 2021) SADV assumption is within reach, as developments unfold from the COVID-19 pandemic – which could trigger trading interest even above our expectations.

July DADC was 1.05m, above 4QFY20’s 0.89m.

• SGX's July derivatives average daily contracts (DADC) was driven by China A50 Index Futures’ trading volume rise of 21% m-o-m. We maintain our FY21 DADC assumption of 0.95m.
• Going forward, market volatility should keep volumes firm, offsetting the reduction of licence agreements with MSCI from Feb 2021 onwards.

Respectable dividend yield.

• We forecast a SGX's FY21 DPS of 32 cents – implying a c.4% dividend yield – based on an 82% payout ratio.
• Management said that going forward, the annualised quarterly DPS will be 32 cents, barring unforeseen circumstances.
• FY20 DPS was 30.5 cents. See SGX Dividend History.

Keep BUY with higher target price

• Our SGD9.50 Target Price is pegged to 24x FY21F EPS, at 1.5SD above the 5-year mean of 22.5x.
• SGX remains in a net cash position – with a monopoly over the trading of Singapore-listed equities – and the downside is deemed limited. Premised on these factors, we reiterate our BUY call.
• See SGX Share Price; SGX Target Price; SGX Analyst Reports; SGX Dividend History; SGX Announcements; SGX Latest News.
• Global economic fluctuations and geopolitical developments are key risks. If the COVID-19 pandemic is prolonged, trading volumes could experience a gradual decline from the current high levels.

Leng Seng Choon CFA RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-08-26

SGX Stock Analyst Report BUY MAINTAIN BUY 9.500 UP 9.200