SINGAPORE (Oct 17): Phillip Securities Research is keeping its “accumulate” rating on Singapore Exchange (SGX) and raising its target price to $8.39, from $7.63 previously, following a strong start to FY18.
“Global equities markets have risen on the back of improving economic growth around the globe,” says investment analyst Jeremy Teong in a Tuesday report.
According to Teong, this has benefited SGX-listed companies in the finance, technology and consumer services sectors.
“Property stock prices have also begun to rise as the domestic property market sentiments improved dramatically on the back of strong residential en bloc sales momentum,” he adds.
The analyst expects SGX’s securities daily average value (SDAV) to continue to show strength, on the back of the recovering global economy and improving domestic property market.
“Average SDAV from July to September was $1.16 billion, higher than the preceding average SDAV of $1.15 billion from April to June,” Teong says. “Expect strong SDAV and DDAV (derivatives daily average volume) to continue in FY18 on the back of synchronous global recovery, peppered with regional volatility.”
In addition, regulatory changes in China and India have encouraged market participants to approach SGX as a platform to trade USD/CNH, INR/USD and China A50 futures, he says.
However, Teong notes that the number of new IPOs remain lacklustre, even as delistings have accelerated.
“The number of listed securities on SGX have been on a decline and there is a lack of large cap stocks with high free float to replace the delistings,” he warns.
Nonetheless, the research house is raising its FY18 SDAV forecast to $1.16 billion, from $1.08 billion previously, on the back of expected improvements in stock market capitalisation and trading volumes.
“We expect SGX’s 1Q18 revenue to come in at $218 million and PATMI to be at $93.5 million, up 12.5% year-on-year,” Teong says. SGX is scheduled to release its 1Q18 results on Oct 25.
Total DPS for FY18 is also expected to increase to 32 cents, from 28 cents in FY17.
As at 12.23pm, shares in SGX are trading 3 cents lower at $7.63 or 21.9 times FY18 earnings with a dividend yield of 4%.
