Despite this, the SDAV has fallen m-o-m since then, with May’s value coming in at $1.3 billion and Bloomberg estimating June’s SDAV to arrive at $1.2 billion.
However, Jaiswal still expects SGX’s 4QFY2025 SDAV to rise 13% q-o-q and 25% y-o-y, with June’s SDAV estimated to grow 26% y-o-y.
“We believe this growth trend will continue, as we expect the Monetary Authority of Singapore’s (MAS) $5 billion equity market development programme (EQDP) initiative to further deepen equity market participation by investors beyond Straits Times Index (STI) constituents,” writes Jaiswal.
He adds: “Nevertheless, 2HFY2025 SDAV is tracking below our prior assumptions. As a result, we trim FY2025 turnover forecasts and lower our FY2025 profit estimate by 1%. Derivatives volume data, due later this week, has yet to be incorporated.”
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Meanwhile, for FY2025, SGX expects expenses to rise at the lower end of its 2% to 4% guidance range and capital expenditure (capex) to come in at the low end of the $70 million to $75 million range.
Over the medium term, the group targets 6% to 8% revenue growth excluding treasury income and a low to mid-single-digit rise in expenses.
On this, Jaiswal forecasts a FY2024 to FY2027 compound annual growth rate (CAGR) of 8.7% in revenue and a CAGR of 5.1% in expenses over the same period.
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Capex, he notes, will rise due to ongoing tech modernisation but is expected to stay below the historical 7% of group revenue.
SGX aims to deliver mid single-digit CAGR in dividend per share (DPS).
As the group’s overseas operations expand, the analyst notes that the effective tax rate is expected to gradually increase.
“It was at around 18% in 1HFY2025 and is projected to stay around these levels. We estimate FY2025 to FY2027 tax rate at 17% to 17.4%,” writes Jaiswal.
Reflecting updated assumptions, he raises his FY2026 and FY2027 SDAV forecasts, leading to a 0.8% and 1.4% uplift in profit estimates each.
Jaiswal writes: “We roll forward our valuation base to FY2026. In light of expected sustained trading activity, we raise our target price-to-earnings ratio (P/E) multiple to 23.5 times, at one standard deviation (s.d.) above SGX’s long-term average.”
Key drivers noted by the analyst include increases in total securities trading volume and total derivatives trading volume, as well as an effective trading and clearing rate.
On the other hand, key downside risks to his call include a lower-than-expected securities market turnover, lower-than-expected trading in derivative contracts and a lower-than-expected clearing and trading rate.
As at 11.52 am, shares in SGX are trading six cents higher or 0.40% up at $15.23.
