Singapore Exchange (SGX Group) shares are up 79 cents, or 6.22%, prior to the midday break on Feb 7, a day after the bourse operator posted record first-half revenue and net profit since listing in 2000.
SGX posted adjusted net profit of $320.1 million for 1HFY2025 ended Dec 31, 2024, up 27.3% y-o-y; while adjusted ebitda was up 23.9% y-o-y at $426.9 million. Adjusted earnings per share was 29.9 cents, up from 23.5 cents this time last year.
SGX also declared an interim quarterly dividend of 9.0 cents per share, up from 8.5 cents this time last year and unchanged h-o-h.
Following a Feb 6 results briefing, Maybank Securities analyst Thilan Wickramasinghe upgraded SGX to “buy” from “hold”, with a significantly higher target price of $14.16 from $10.12 previously.
SGX’s net profit was ahead of Maybank’s expectations on stronger cash equities velocity and derivatives demand.
One month into US President Donald Trump’s administration, trade war-driven volatility and uncertainty is showing no signs of abating, especially in Asia, he adds. This could drive further demand for SGX’s platform.
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“These conditions are likely to persist as global geopolitical volatility and monetary & fiscal uncertainty increases,” says Wickramasinghe. “This should give SGX a competitive advantage as a deeply liquid risk management venue. The high operating leverage of the cash equities segment could benefit from safe haven flows, positive policy measures and a stronger IPO pipeline.”
Wickramasinghe thinks a higher dividend is unlikely, with 69% payout assumed from FY2025 to FY2027. But positive tailwinds as a regional safe haven and risk management venue are positive catalysts for SGX going forward, he adds.
Dividends disappoint
Other analysts are staying measured but with higher target prices. Phillip Securities Research senior analyst Glenn Thum is maintaining “accumulate” with a higher target price of $13.90 from $10.78 previously.
In a Feb 7 note, Thum hopes SGX can peg its dividend policy to a payout ratio instead of its current “mid-single digit CAGR [growth] in the medium term”. Assuming a 65% payout ratio, for example, 1HFY2025 dividend per share would increase 24% y-o-y to 21 cents.
“We expect SGX to maintain stable growth from their OTC FX business pillars and currency derivatives volumes while keeping expense growth contained,” says Thum. “Heightened volatility surrounding the Trump administration and Singapore’s standing as a flight-to-safety venue in Asia will continue to boost volumes in 2025.”
‘Hold’, ‘neutral’ but higher TP
OCBC Investment Research, meanwhile, is maintaining “hold” on SGX with a higher fair value estimate of $13.68 from $12.21.
Likewise, CGS International Research analyst Andrea Choong is staying “hold” on SGX with a higher target price of $13.20 from $12.50 previously.
SGX’s 1HFY2025 results beat both OCBC’s and CGSI’s expectations.
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SGX’s cash equities segment is the focus of an ongoing market review, but SGX CEO Loh Boon Chye sidestepped questions about the group’s progress.
“Although disclosure on potential Singapore equities market revitalisation initiatives remain scant, we think investors have raced ahead to price in the potential pick-up in trading volumes, if any,” says CGSI’s Choong. “At this stage, we think that expectations of impactful measures are running high, and unconvincing initiatives may result in some unwinding of SGX’s recent re-rating.”
Meanwhile, Morningstar Equity Research analyst Roy Van Keulen has increased his target price on SGX by 4% to $13.60.
“With the US now trying to repatriate manufacturing jobs by implementing tariffs and other trade barriers, we expect this to lead to increasing volatility, thus continuing to benefit Singapore Exchange , which receives over 50% of its revenue from derivatives-related revenue, compared with under 25% for most exchanges,” he writes in a Feb 6 note.
RHB unmoved by ‘unexciting’ yield
RHB Bank Singapore analyst Shekhar Jaiswal, who had just issued a report on Jan 15 prior to SGX’s results, is staying “neutral” with an unchanged $12.80 target price.
This target price is unchanged from Jaiswal’s prior report from Nov 20, 2024. Jaiswal’s target price includes a 4% ESG premium based on RHB’s proprietary methodology.
In a Feb 7 note, Jaiswal says SGX’s core profit — which beat many analysts’ dated reports from the fourth quarter of 2024 — was just “in line” with RHB’s estimates.
Jaiswal continues to think SGX faces “growth challenges and unexciting yield”. “We maintain that a material improvement in SGX’s moderating earnings growth outlook remains dependent on elevated local equity market sentiment, an increase in the number of new IPO listings, successful new product launches, earnings-accretive acquisitions and a favourable outcome of the ongoing market review exercise — all of which are a bit difficult to pencil into our estimates right now,” he adds.
Despite factoring in SGX’s dividend growth, which is in line with guidance, SGX’s forward yield of 3% is “unexciting” and “well below” the Singapore equity market’s yield, says Jaiswal.
