RHB Bank Singapore analyst Shekhar Jaiswal has kept his “neutral” call on Singapore Exchange (SGX) after the exchange reported a “disappointing” set of market statistics for the FY2023 ended June 30.
Jaiswal’s report comes after SGX reported its market statistics for the month of June on July 12.
The exchange’s securities daily average value (SDAV) climbed 14% m-o-m and 2% y-o-y to $1.2 billion while total securities market turnover value rose 3% m-o-m to $23.7 billion.
For the FY2023, however, both securities turnover and SDAV “disappointed” Jaiswal’s expectations with declines of 14% and 13% on a y-o-y basis respectively. FY2023’s SDAV stood 2% lower than the analyst’s forecast.
SGX’s derivatives daily average volume (DDAV) also stood lower-than-expected with the FY2023’s DDAV coming in 4% below Jaiswal’s forecast. However, June’s DDAV surged by 15% m-o-m and remained flat y-o-y.
Following June’s statistics, Jaiswal has trimmed his earnings estimates for FY2023 to FY2025 by 3% to 4%.
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“We still maintain our below-consensus forecasts, and reiterate our weak outlook for SGX’s cash equities business. Its forward P/E is at the historical mean, i.e. fairly valued,” he writes.
At its share price of $9.90 as at Jaiswal’s report on July 14, he notes that SGX’s shares have outperformed the benchmark Straits Times Index (STI) but the company “lacks near-term catalysts”.
“Amidst the relatively defensive nature of its earnings, year-to-date (ytd), SGX’s share price has outperformed the STI by 7%. However, this brings its forward P/E in line with its historical P/E mean of [around] 22x. While SGX’s non-cash equity businesses (ie the fixed income, currencies & commodities and equity derivatives business) are key long-term growth drivers, we continue to maintain our below-Street FY2024 earnings for now,” he says.
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He adds: “SGX’s stock offers a dismal 3.4% forward dividend yield. We value the stock by applying a 22x P/E on its FY2024 earnings per share (EPS).”
Despite his lowered earnings estimates, Jaiswal has upped his target price marginally to $9.90 from $9.80 previously. His target price includes an environmental, social and governance (ESG) premium of 8% to its fair value estimate of $9.20 as SGX’s ESG score is four notches above the country median.
As at 4.36pm, shares in SGX are trading 13 cents lower or 1.36% down at $9.44.
