CGS-CIMB analyst Andrea Choong has also cut her earnings per share (EPS) estimates for the FY2022 to FY2023 by 8% to 10% due to the lower treasury income and higher operating expenses (opex).
Her revised target price is pegged to 25 times 2022 P/E, 0.5 standard deviation (s.d.) above the last traded (LT) mean.
"A downside risk is MSCI A-share futures launch by HKEX," writes Choong in an Aug 6 report.
Meanwhile, Maybank Kim Eng has downgraded the stock to a “hold” rating from “buy” previously, with a lower target price of $11.48.
It notes that SGX’s earnings were behind street expectations, driven by weaker revenue from the equity segment.
It warns that this trend may persist with market velocity losing steam following a strong performance since the start of the pandemic.
“SGX has had a good run. Near term catalysts limited,” Maybank KE’s head of research Thilan Wickramasinghe writes in a note dated Aug 6.
UOB Kay Hian, too, has downgraded the stock to a “hold” rating with a target price of $11.65.
It notes that SGX was affected by lower treasury income, which saw the equities derivatives segment decline almost 20% y-o-y in FY2021.
“While growth is in focus, especially for its [foreign exchange] business, costs appear to be challenging,” the brokerage writes in an Aug 6 report.
RHB Securities is yet another brokerage that has downgraded the stock to a “neutral” recommendation with a lower target price of $11.10 from $12.30 previously.
The brokerage notes that SGX guided for an elevated operational expenditure (opex) over the next 12-to-18 months.
Only after then, could revenue, earnings before interest, tax, depreciation and amortisation, and operating margins recover.
Finally, OCBC Investment Research has a “sell” call for the stock with a fair value of $11.30.
It warns that market depth remains a longer-term structural concern.
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The brokerage notes that the exchange has only registered one new equity listing, in contrast to seven de-listings in the past month.
In addition, the impending launch of a competing product to SGX’s China A50 index futures could erode the bourse operator’s derivatives volume.
As at 3.33 pm, SGX was down 34 cents or 3% at $10.99 with 5.5 million shares changed hands.
