Singapore Exchange (SGX)

Singapore Exchange (SGX) reported a stellar performance in the first half of FY25 (1H25), with a core net profit of S\$320 million, marking a 17% half-on-half (hoh) and 28% year-on-year (yoy) increase. This was significantly above expectations, forming 60% and 53% of CGS International and Bloomberg consensus full-year forecasts, respectively. This growth was driven by a 16% yoy increase in revenues, fueled by higher volumes in cash equities and equity derivatives, alongside robust treasury income.

Operating expenses (Opex) rose by only 3% yoy, showcasing disciplined cost control. SGX declared an interim dividend of 9 Singapore cents per share, compared to 8.5 cents in the same quarter last year.

Key Drivers

• Cash equities turnover velocity for primary-listed stocks rose to 40% in 1H25, compared to 34% in 1H24.
• Equity derivatives volumes increased by 16% yoy, driven by FTSE China A50 and GIFT Nifty 50 contracts.
• Currencies and commodities segments also demonstrated strength, with OTC FX daily average volumes (DAV) rising 35% yoy to US\$136 billion.

Outlook and Risks

While investors are optimistic about potential revitalization initiatives in the Singapore stock market, the lack of detailed disclosures remains a concern. SGX’s performance in 2H25 is expected to soften due to tapering macroeconomic tailwinds and a muted outlook for US Federal Reserve rate cuts.

CGS International reiterated a “Hold” recommendation on SGX, raising the target price to S\$13.20, pegged at a 23x CY25 forward P/E. Upside risks include sustained demand for risk management from market volatility, while downside risks involve significant declines in treasury income due to interest rate cuts.

Financial Projections

• Revenue: S\$1,276 million (FY25 forecast) vs. S\$1,232 million (FY24).
• Net Profit: S\$604 million (FY25 forecast) vs. S\$594 million (FY24).
• Dividend Yield: 2.83% (FY25 forecast).

Bursa Malaysia

Bursa Malaysia is expected to deliver steady, albeit modest, growth in the coming years. The stock is rated “Add” by CGS International, with a target price of RM11.30. Bursa’s FY25 P/E is projected at 21.8x, with a 1.7% three-year EPS compound annual growth rate (CAGR).

Strengths

• Bursa boasts a strong dividend yield of 4.3% for FY25.
• It commands a high return on equity (ROE) of 35.3% for FY25.

Challenges

Despite its solid financial metrics, Bursa Malaysia’s EPS growth remains limited, reflecting a relatively stable yet unexciting growth profile.

Hong Kong Exchanges & Clearing

Hong Kong Exchanges & Clearing (HKEX) remains a dominant player in the global financial market. However, it is not rated by CGS International. The company is projected to achieve a P/E of 29.0x for CY25 and a dividend yield of 3.0%.

Key Highlights

• HKEX’s ROE of 25.0% underscores its profitability and efficiency.
• The company continues to benefit from its strategic position as a gateway for Chinese capital markets.

Future Outlook

While HKEX is well-positioned, its relatively high valuation suggests limited room for further price appreciation in the near term.

Nasdaq Inc

Nasdaq Inc, a leader in technology-driven stock exchanges, is projected to grow significantly, with a three-year EPS CAGR of 28.0%. Despite not being rated by CGS International, its CY25 P/E is estimated at 26.3x, with a relatively modest dividend yield of 1.3%.

Opportunities

• Nasdaq’s focus on technology and data services positions it for long-term growth.
• Its innovative approach to capital markets is a key differentiator.

Risks

Nasdaq’s high valuation and lower dividend yield may deter income-focused investors.

Deutsche Boerse

Deutsche Boerse, another key player in the global exchange market, is projected to achieve a CY25 P/E of 21.4x. Although not rated by CGS International, the company offers a dividend yield of 1.8% and a strong ROE of 17.6% for CY25.

Strengths

• Deutsche Boerse benefits from a stable and diversified business model.
• Its valuation remains attractive compared to peers like Nasdaq and HKEX.

Challenges

Similar to other global exchanges, Deutsche Boerse faces headwinds from potential interest rate cuts, which could impact its treasury income.