“We believe the current volatility and Singapore dollar (SGD) safe-haven inflows are structural in nature, and anticipate continued flows into Singapore, particularly for yield stocks, post Liberation Day, given the diminished trust in the US dollar (USD) amid ongoing de-dollarisation trends and re-evaluation of US credit and policy credibility,” Lim writes.
“SGX will be a key beneficiary, especially in the current low-interest rate environment where investors seek higher yields as risk-free alternatives have fallen to [under] 1.7%,” she adds.
The analyst is also waiting for the second set of recommendations by the EQDP committee, along with the effect from initial inflows stemming from the effect of the programme.
Any “positive developments” from the second tranche to rejuvenate the markets could further drive a share price re-rating. “We believe the market has yet to price in growth from the multiplier effect of this liquidity injection,” says Lim, who notes that the metric of securities daily average value (SDAV) is a “key driver” of the change’s stock price given that it translates directly into commissions and revenues.
See also: OCBC's Lim raises fair value for Bumitama Agri second time in a fortnight
Shares in SGX, which have risen to $16, 1.85% higher, on July 31, is likely to see further growth, in the analyst’s view.
“We maintain ‘buy’ with a higher target price of $18.20, as we believe SGX’s revenue drivers across all asset classes continue to power on,” she writes.
Lim has also increased her earnings estimates by 3% to 4% for FY2025 to FY2026 due to higher trading volumes across all asset classes. In FY2025, Lim believes SGX will report a net profit of $627 million with a net dividend yield of 2.3%. The analyst is also expecting the change to distribute higher dividends, even as its yield has narrowed to 2.2% currently.
The exchange is slated to report its full-year results on the morning of Aug 8.
Lim’s new target price represents an FY2027 P/E of 28 times, above 2 standard deviations (s.d.) of its five-year historical mean. It is also based on the dividend discount model, which factors in an expected rate of return of 7%; an expected growth rate of 5% from 4% previously; and an expected return on equity (ROE) of 35%.
Shares in SGX closed at $16, 1.85% higher, on July 31.
