SINGAPORE (Oct 26): Analysts are bullish on Singapore Exchange (SGX) after the bourse started its new fiscal year on a strong note.
SGX reported earnings of $90.7 million for the 1Q18 ended September, 9% higher than a year ago, on the back of a 7% increase in revenue to $204.5 million.
Securities daily average traded value (SDAV) for July-Sept period increased 18% to $1.16 billion, with total traded value rising 18% to $73.2 billion. This included equities where traded value increased 14% to $67.5 billion.
See: SGX posts 9% rise in 1Q earnings to $90.7 mil
“We remain bullish on SGX, with the expectations of continued SADV strength,” says RHB Research analyst Leng Seng Choon. “We assume FY18 SADV of $1.35 billion, and a stronger FY19 SADV of $1.39 billion, on the back of bullish investment sentiment.”
RHB is keeping its “buy” call on SGX with a target price of $9.00.
According to CIMB Research analyst Ngoh Yi Sin, SGX’s positive SDAV momentum offsets lower average clearing fee for equities, which remain under pressure from a higher mix of ETFs and warrants, and a higher proportion of trading from market makers and liquidity providers.
“Nevertheless, SGX still enjoys a dominant position as a regional derivatives exchange,” she adds.
CIMB is maintaining its “add” rating on SGX and raising its target price to $8.21, from $8.04 previously.
“Opportunities that lie ahead for SGX include improving market sentiment, new asset classes, steady IPO pipeline and diversified geographical growth,” Ngoh says.
As at 11.33am, shares in SGX are trading 3 cents higher at $7.60 or to 23.1 times CIMB FY18 earnings with a dividend yield of 3.8%.
