SINGAPORE EXCHANGE LIMITED (SGX:S68)
Singapore Exchange - Market Statistics For Jun 2022; NEUTRAL
- Although Singapore Exchange (SGX)’s June market statistics pointed to a m-o-m drop, with securities daily average volume (SDAV) and derivatives daily average volume (DDAV) falling 23% and 9%. See SGX's announcements.
- The implied 4QFY22 SDAV was higher than our estimate.
- We maintain NEUTRAL on SGX (SGX:S68) as its forward P/E is in line with the historical average despite the expectation of earnings growth in FY23-24. New S$10.70 target price for SGX (from S$10.40), 11% upside, as we lift FY22-24F (Jun) earnings by 2-3% following higher-than-expected SDAV data for June and 4QFY22.
SGX's FY22 securities market turnover came in ahead of, and derivatives turnover came in line with, our estimates.
- Although SGX’s June 2022 securities daily average volume (SDAV) of S$1,165m decreased 4% y-o-y and 23% m-o-m, it brought the FY22 SDAV to S$1,273m, which was ~4% higher than our estimate of S$1,219m.
- Trading activity for derivatives rose strongly in June, with derivatives daily average volume (DDAV) increasing 24% y-o-y but down 9% m-o-m to 1.1m contracts.
- The higher trading activity was due to the sustained volatility in global markets, which drove the institutional demand for portfolio risk management.
Our FY22 estimate for SGX is still above the Street forecast.
- We expect SGX to report S$640m in EBITDA and S$459m in profit for FY22 in its upcoming results announcement – higher than the Street estimates of S$611m and S$438m. Our revenue estimate of S$1,109m is also higher than the consensus estimate of S$1,094m.
Forward P/E is in line with the historical average.
- SGX’s FY23F P/E is in line with its historical average and offers a modest yield of 3.3% (STI’s yield is +4%). Our target price is based on a target P/E of 22x FY23F EPS, in line with its historical average P/E.
- We view our target P/E as reasonable – given the expectation of a modest rise in profits in FY23F. Our target price for SGX includes an ESG premium of 8% over its fair value of S$9.90.
Including earnings and target price sensitivity on FY23 estimates.
- As the uncertain macroeconomic environment could persist well beyond current fiscal year (ie FY22) for SGX and could further boost its earnings, we have included the FY23F earnings and target price sensitivity analysis. See Figure 1 and Figure 2 in the report attached below.
Risks.
- Downside risks:
- Higher than estimated operating costs for FY22F getting reported in upcoming results;
- a slower ramp-up in revenue contributions from acquisitions.
- Upside risks:
- Higher-than-estimated SDAV from the potential pipeline of exchange traded funds, REITs, and special purpose acquisition company listings; and
- continued global leading to higher derivatives volumes.
- See
Shekhar Jaiswal
RHB Securities Research
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https://www.rhbgroup.com/
2022-07-14
SGX Stock
Analyst Report
10.70
UP
10.400
