As the Singapore Exchange (SGX) continues to implement its multi-asset strategy, Maybank Kim Eng has initiated coverage on the bourse operator with a “buy” rating and target price of $10.77.
The brokerage believes that SGX’s evolution into a "pan-Asian, multi-asset" platform offering derivatives, fixed income and alternative products provides an opportunity to investors.
It notes that SGX is well positioned to benefit from multiple structural trends that are driving demand for risk-management products.
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As a result, it expects SGX’s revenue contribution from its non-cash equities businesses to rise to 74% of total revenue in FY23 from 62% currently.
Maybank KE says this will be driven by rising demand for risk management because of increased market volatility, stricter regulations, digitisation of over-the-counter trades, expanding passive investing and reconfiguration of supply chains.
Moreover, SGX’s balance sheet has the capacity to gear up offering significant dry-powder for accretive, bolt-on acquisitions in growth segments, adds the brokerage.
See: iFAST triggers second SGX query in three months as share price surge over 8%
“Deep liquidity in its products and a strong execution track record should provide SGX with a competitive advantage [versus] rivals regionally, we believe,” Maybank KE’s head of research Thilan Wickramasinghe writes in a note dated Nov 16.
As at 12.19 pm, SGX traded flat at $9.10 with 1.7 million shares changed hands.
