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

SINGAPORE EXCHANGE LIMITED (SGX:S68)

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.

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.

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.

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