Singapore Exchange - Maybank Kim Eng 2021-06-21: Resilient Platform

SINGAPORE EXCHANGE LIMITED (SGX:S68)

Singapore Exchange - Resilient Platform

In its 1H21 results, SGX (SGX:S68)’s PAT came ahead of Street/MKE expectations supported by contributions from recent acquisitions and stronger cash equities volumes. Derivatives also 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 SGX's earnings momentum and keep dividend visibility high, in our view.

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.
In addition, continued momentum in equities should keep market velocity well supported.

SGX's share price currently trades at 24x 2021E P/E, when in the post-GFC up-cycle the stock reached 36x. Accretive acquisitions could potentially further drive earnings upside in the medium term. The successful integration of BidFX and Scientific Beta (which collectively contributed 6% of 1H21 revenues) point to the Group’s ability to execute.
Our target price for SGX is based on blended multi-stage DCF (WACC 7.2%, 1% terminal growth) and peer P/E (29x target).

Disruption to SGX's technology infrastructure leading to halts in trading can have a material impact on earnings as well as market confidence. Similarly, cancellation or losses of derivative licensing agreements can have a material volume and fee impact. The scaling of disruptive FinTechs and off-exchange trading solutions could pose longer-term threats to volumes.
See
SGX (SGX:S68) is one of the participating companies of Invest ASEAN 2021 by Maybank Kim Eng.

Thilan Wickramasinghe Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-06-21

SGX Stock Analyst Report BUY MAINTAIN BUY 11.480 SAME 11.480