Maybank Securities analyst Thilan Wickramasinghe has kept his “buy” call on Singapore Exchange (SGX) with a lower target price of $10.65 from $11.20 previously due to adjustments to market run rates and peer valuations.
In his Oct 6 report, Wickramasinghe says a stronger derivative outlook sees Maybank raising its FY2023 EPS by 3%. However, listings uncertainty and new business integration expenses led to lower FY2024 EPS by 3%.
“SGX’s derivatives platform continues to see support as investors look to mitigate and hedge risks in the current global environment,” he adds.
SGX’s Sept figures show futures volumes up 5.1% y-o-y and 14% m-o-m to 22.28 million contracts. According to SGX, the higher derivatives trading volume increased to a record during the month due to higher activity in foreign exchange (FX) and commodity futures.
Wickramasinghe says SGX’s liquid contracts in FX, commodities and indices continue to provide a competitive moat in current market volatility. This is important as the derivatives-led, non-cash equities segment is set to deliver 58% of revenues in FY2023 (about 51% FY2022).
“Singapore’s defensive equity market has held up better than global peers. Our derived market velocity for FY2023 YTD at 29% — while lower than FY2022 (36%) — is similar to pre-Covid FY2017-FY2019 levels. This should give some downside protection to the equities segment revenues going forward, in our view,” says Wickramasinghe.
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Under Maybank’s ESG2.0 scoring, SGX receives a 56 — this is above average and its efforts in improving sustainability reporting and action in the financial sector are strong positives. However, improvements to quantitative disclosures in areas such as waste management and diversity could drive a higher score, in Maybank’s view.
Particular areas of note are in board independence and female representation, where the group’s proportions are significantly lower than Hong Kong Stock Exchange (HKEX), Wickramasinghe highlights.
“Maybank believes SGX’s multi-asset approach gives it a strong advantage during market uncertainty, while also increasing regional relevance,” says Wickramasinghe.
As at 11.14am, shares in SGX are trading 7 cents higher or 0.8% up at $8.80.
