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Singapore Exchange - Maybank Kim Eng 2021-01-24: Platform Play

SINGAPORE EXCHANGE LIMITED (SGX:S68) | SGinvestors.io SINGAPORE EXCHANGE LIMITED (SGX:S68)

Singapore Exchange - Platform Play


Resilient platform poised to deliver amidst volatility

  • SGX (SGX:S68)’s 1H21 PAT came ahead of Street/MKE expectations supported by contributions from recent acquisitions and stronger cash equities volumes. See SGX's announcements.
  • Derivatives saw limited disruption from the departure of key contracts pointing to the resilience of its multi-asset platform. Higher contract pricing, strong equity market velocity and new product launches should continue to support earnings momentum and keep dividend visibility high, in our view.
  • We raise our target price to S$11.48 from S$10.77. Maintain BUY.



Acquisitions delivering

  • The integration of BidFX and Scientific Beta contributed 6% of SGX's revenues in 1H21. Strengthening demand for fixed income listings together with new product launches – especially in the ESG space – should continue to drive growth going forward, we believe.
  • Management claims they are willing to leverage SGX’s balance sheet (current debt-to-equity 9.6%) for further accretive acquisitions. This should be a positive catalyst, given their track record so far.


Tailwind from cash equities, derivatives

  • Derivative volumes increased 4% y-o-y despite the exit of key MSCI contracts. The newly introduced FTSE contracts seem to be gaining traction. SGX’s ability to retain liquidity here is a strong indicator of the successful execution of its multi-asset platform. While derivative fees fell 5% y-o-y on the back of introductory pricing for the new FTSE contracts, we expect this to normalise in 2H21.
  • Separately, cash equity average daily traded value (ADV) increased 19% y-o-y and velocity rose to 49% (~34%). Clearing fees increased 2.5% y-o-y driven by a larger retail mix, we believe. Liquidity support by central banks and the COVID-19 recovery theme could continue to support this momentum, in our view.
  • We have raised our FY21 average daily value (ADV) forecasts to S$1.3bn (from S$1.0bn).

Raise SGX target price to S$11.48. Maintain BUY






Thilan Wickramasinghe Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-01-24
SGX Stock Analyst Report BUY MAINTAIN BUY 11.480 UP 10.770



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