Singapore Exchange - RHB Invest 2020-12-04: Momentum To Carry On; Keep BUY


Singapore Exchange - Momentum To Carry On; Keep BUY

  • SGX's November data showed m-o-m improvement – both securities and derivative trading rebounded – largely on vaccine-induced optimism. 5MFY21F (Jun) also pointed to similar strength.
  • We expect momentum of trading activities to largely sustain into 2HFY21F, driven by a greater sector rotation to cyclical sectors. We raise SGX's FY21F-22F earnings forecast by 10% and peg our revised FY22F EPS to 24x (+1SD from its mean).
  • Maintain BUY, with new target price S$10.30 from S$9.50, 13% upside and c.4% yield.

Higher market turnover for SGX in November

  • Singapore Exchange (SGX:S68) recorded S$35.7m in total securities trading value in November, rebounding 54% m-o-m (+35% y-o-y) from October. Securities average daily value (SADV) also saw a similar trend (+61% m-o-m/+31% y-o-y). We believe this was mainly due to vaccine-induced optimism following the release of favourable vaccine test results by multiple pharmaceutical companies.
  • The Straits Times Index (STI) rallied c.16pts during the month, led by strong gains in index heavyweight cyclicals.

5MFY21F momentum still strong.

  • SGX's 5MFY21F (Jul-Nov 2020) securities trading value was still strong at c.S$137m (+18% y-o-y) largely lifted by strong November performance. We believe growth will sustain into 2HFY21F on investors’ tactical rotation to cyclical sectors, driven by a recovery in business activities and the eventual approvals of COVID-19 vaccines (catalysts).


  • SGX's derivative trading should also see m-o-m improvement in our view, driven by 26% and 7% m-o-m increased trading in Nikkei 225 and China A50 contracts. We note that FTSE Taiwan contract has been gaining tremendous traction – traded contracts soared to 1.25m (Oct: 0.93m) – while trading of MSCI Taiwan Futures continued to dwindle as the exchange migrates clients to FTSE Taiwan, ahead of the MSCI-agreement expiry in Feb 2021.

SGX's earnings forecast and target price.

  • We revise our SGX's FY21F-22F earnings forecast by +10% after imputing new FY21F-22F SADV of c.S$1.28bn (vs 5MFY21F: c.S$1.29bn) and c.S$1.24bn.
  • We believe trading activities will stay elevated in FY21F, although somewhat moderate from the high base in FY20. FY21F-22F ADC are now at 204m and 206m on expected elevated volatility and more product offerings by SGX (eg ESG-related products and thematic indices by Scientific Beta).
  • Our SGX Target Price is raised to S$10.30 due to the earnings revision. We peg FY22F EPS to 24x P/E (+1SD from its mean).
  • See SGX Share Price; SGX Target Price; SGX Analyst Reports; SGX Dividend History; SGX Announcements; SGX Latest News.
  • Maintain BUY, with new target price S$10.30 from S$9.50, 13% upside and c.4% yield.

Singapore Research RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-12-04
SGX Stock Analyst Report BUY MAINTAIN BUY 10.30 UP 9.500