Overview of Singapore Exchange Limited (SGX)

Singapore Exchange Limited (SGX) owns and operates Singapore’s securities and derivatives exchange along with related clearing houses. SGX also provides ancillary securities processing and IT services to participants in the financial sector.

The company is categorized under the Financials sector and trades under the Bloomberg ticker: SGX SP. With a market capitalization of S\$12,974.7 million (US\$9,445.1 million), SGX has maintained a solid presence in the financial market.

Stock Data and Price Performance

• Share Price: S\$12.12
• Target Price: S\$11.83
• Upside: -2.4%
• 52-week High/Low: S\$13.09/S\$8.87
• Major Shareholders: None disclosed

SGX’s price performance over the last year has been notable, with a 22.5% increase. However, the stock has dipped by 4.9% year-to-date, reflecting short-term pressures.

1HFY25 Results Preview: Strong Performance Expected

SGX is poised to report robust 1HFY25 revenue growth of 15% year-on-year (yoy) and adjusted PATMI growth of 16% yoy. This performance is attributed to broad-based outperformance across most business segments, particularly cash equities, equity derivatives, and the fixed income, currencies, and commodities (FICC) segment.

The company will release its 1HFY25 results on 6 February 2025, before market opening. Key highlights include:

Robust Securities Turnover

Total securities turnover value surged by 34.4% yoy to approximately S\$163 billion, driven by:

• Lower US Federal Reserve interest rates.
• Positive sentiment stemming from China’s stimulus measures.
• Increased retail investor participation at a two-year high.

This led to a projected 36% yoy increase in cash equities trading and clearing revenue to around S\$105 million, boosting profitability in this segment.

Strong Derivatives Volume

Total derivatives traded volumes rose by 21.4% yoy, with significant contributions from:

• FTSE China A50 Index Futures (+29.6% yoy).
• NSE IFSC Nifty 50 Index Futures (+16.3% yoy).
• MSCI Singapore Index Futures (+3.8% yoy).

Equity derivatives trading and clearing revenue is expected to grow by 18% yoy to approximately S\$145 million. The uncertain macroeconomic environment continues to drive demand for risk management solutions.

FICC Segment Outperformance

The FICC segment achieved record-high trading volumes, with total forex volumes increasing by 43.3% yoy. Key drivers included:

• USD/CNH futures (+33.0% yoy).
• KRW/USD futures (+103.7% yoy).
• INR/USD futures (+57.9% yoy).

The commodities segment also performed strongly, led by:

• Iron ore futures (+14.7% yoy).
• SGX SICOM rubber futures (+37.8% yoy).

FICC trading and clearing revenue is projected to grow by 26% yoy in 1HFY25, continuing its upward momentum.

Key Financial Metrics

SGX’s financial outlook remains stable, with consistent growth in net turnover and profitability. Dividend yields are expected to grow modestly, reaching 3.3% by 2027F.

Stock Impact and Recommendations

Dividend Growth

SGX announced a final quarterly dividend of 9.0 S cents/share for FY24, bringing total dividends to 34.5 S cents/share (a 6% increase yoy). The dividend payout ratio is expected to remain around 67% for 1HFY25, with a projected FY25 total dividend of 36.5 S cents/share.

MAS Review Group Update

The Monetary Authority of Singapore (MAS) is conducting a review to strengthen the equities market. Recommendations may include channeling sovereign wealth funds into small-mid cap stocks, listing government-linked companies, and streamlining listing regulations. These measures aim to improve market liquidity and valuations.

Valuation and Recommendation

SGX is rated as a HOLD, with a target price of S\$11.83, pegged to a 22x PE multiple of FY25 earnings. While the company’s resilient business model benefits from global economic uncertainty, no immediate catalysts justify a higher valuation. Investors are advised to wait for better entry points.