SINGAPORE (June 28): DBS Group Research is maintaining its “hold” call on SGX with a flat target price of $7.05 - as despite a new structure, there are no tangible growth targets on the horizon yet.
The new structure will not incur additional costs associated with reorganization.
There will be four business and client units being formed - Fixed Income, Currencies and Commodities (FICC), Equities, Data, Connectivity and Indices (DCI), renamed from the existing Market Data and Connectivity (MDC) unit, and Global Sales and Origination (GSO).
See: SGX reorganises into four business units to pursue growth, build scale
According to DBS analyst Rui Wen Lim, equities are likely to emerge as the largest revenue contributor for SGX, contributing 70% of its revenues.
“The FICC and DCI units are also expected to enjoy synergies to scale growth. At present, there are no tangible growth targets for the various units, though the growth in FICC and DCI is likely to be higher and more aggressive than that of Equities,” says Lim.
In addition, SGX had previously made strategic investments in Trumid (a New York-based startup that runs an electronic corporate bond trading platform) and BidFX (a trading platform).
Lim adds, “The alignment will further deepen SGX’s expertise in various asset classes that it wants to scale, with a focus on execution capability. SGX is keen on strategic growth/acquisitions in selected asset classes, such as in the FX and Index business space.”
As at 2.58pm, shares at SGX are trading 4 cents lower at $7.91, implying a dividend yield of 4.7.
