DBS Group Research analyst Lim Rui Wen has maintained her “hold” call for Singapore Exchange (SGX) as there are no immediate catalysts for the stock, on top of mixed performances of 1HFY22 equities and derivatives volumes.
This is despite the good contributions SGX saw from all business segments over the past two years, including from equities and fixed income, currencies and commodities (FICC), on the back of heightened market volatility.
Lim notes that the stock also faces competition risks. “SGX’s FTSE China A50 Index futures, which used to be the only offshore China A50 futures, accounting for about 40% of SGX’s total derivatives volumes, now sees competition from HKEX's MSCI China A50 Connect index futures, which is gaining market share. Should HKEX continue to gain market share, there is potential earnings risk for SGX as well,” she adds.
DBS continues to monitor the execution of the newly acquired index provider Scientific Beta and FX trading platform BidFX as SGX sets its sight on doubling revenues from Data, Connectivity, Indices (DCI) and FICC in the next four years.
Potential catalysts include higher-than-expected growth in securities daily average value (SDAV) as well as FICC and DCI re-rating catalysts, says Lim.
DBS's dividend discount model-based target price at $10.20 represents about 24 times one-year forward PE, which is 1 standard deviation above its five-year historical mean.
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As at 3.14pm, SGX was trading 3 cents higher or 0.3% up at $9.68.
