Most analysts have turned more sanguine on the Singapore Exchange’s (SGX) following the local bourse operator’s better-than-expected results in 1HFY2021 ended Dec 31, 2020.
See: SGX reports 12% higher 1H21 earnings of $240 mil, declares interim quarterly dividend of 8 cents per share
This was the result of SGX having reaped the fruit of its recent acquisitions and migration to FTSE for some of its derivative products.
CGS-CIMB Research has raised its FY2021-FY2023 earnings forecasts by 17%-19% on higher trading volumes and contributions from Scientific Beta and BidFX.
The brokerage has kept its “add” rating for the stock with a higher target price of $11.61 from $9.00 previously.
The brokerage believes that SGX’s successful migration of its customer base to its FTSE Taiwan futures offering offers promise of executing other initiatives in narrowing the earnings gap left by its predecessor’s licence expiry.
“Further, we expect equity turnover to sustain over FY2021 given the low-rate environment and macro uncertainty, supporting hedging demand,” CGS-CIMB analyst Andrea Choong writes in a note dated Jan 23.
Similarly, Phillip Securities has raised its FY2021 earnings forecast by 8% to incorporate full-year expense guidance of $535 million-$545 million.
The brokerage has maintained its “accumulate” call for the stock with a higher target price of $11.01 from $9.45 previously.
The brokerage notes that SGX has laid out a pipeline for growth ahead.
This includes the expanding suite of products with FTSE Russell and development of indices under Scientific Beta to capture new investment trends.
Moreover, SGX has signed a memorandum of understanding with the China Central Depository and Clearing to promote Singapore’s and China’s bond markets.
The bourse operator has also collaborated with Nasdaq to be its exclusive partner for its sustainable bond network initiative.
“Continued development of multi-assets to anchor long-term growth,” Phillip Securities’ analyst Tay Wee Kuang writes in a Jan 25 report.
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Meanwhile, RHB Securities has also raised its FY2021-FY2022 earnings forecasts by 4%-9% mainly on its assumption of higher securities average daily value.
The brokerage has reiterated its “buy” recommendation for the stock with a higher target price of $11.60 from $10.30 previously.
“We expect the trading scenes in both equity and derivative markets to be supported by a recovery in global economies (due to a wider availability of vaccines) and continued portfolio risk management (the US-China relationship),” the RHB Singapore research team writes in a Jan 25 note.
DBS Group Research, however, is less optimistic on SGX.
The brokerage says it has remained “more conservative” on its earnings estimates for SGX given that equities and derivatives had already seen good traction in FY2020-1HFY2021 due to heightened market volatility.
The brokerage has kept its “hold” rating for the stock albeit with a higher target price of $10.20 from $8.40 previously.
DBS also says SGX’s valuations are getting “rich”.
Moreover, the bourse operator may face competition from the Hong Kong Exchanges and Clearing (HKEX), which has new product offerings with MSCI.
HKEX had also announced in March 2019 that it is planning to launch A-share futures contracts.
“These may compete with SGX’s FTSE China A50 Index Futures, which accounts for about 40% of SGX’s total derivatives volume,” DBS analyst Lim Rui Wen writes in a Jan 25 report.
As at 11.07 am, SGX was down 5 cents or 0.5% at $10.04 with 2.1 million shares changed hands.
