SGX’s valuation ‘appears stretched’ unless July’s strong data can be sustained: RHB

The Singapore Exchange (SGX Group) has enjoyed a “strong start to the new fiscal year”, says RHB Bank Singapore analyst Shekhar Jaiswal. SGX’s current FY2026 began on July 1.

July data was strong, with implied securities and derivatives volumes ahead of 1HFY2026 estimates, says Jaiswal. However, the stock’s forward valuation looks stretched unless July strength is sustained and annualised, he adds.

Hence, Jaiswal keeps his “neutral” call and $15.90 target price unchanged in an Aug 20 note, as “much optimism appears priced in”.

Equities data

Based on July data, SGX’s securities market turnover rose to $33.8 billion, up 27% y-o-y and 30% m-o-m, with securities daily average value (SDAV) at $1.47 billion, up 27% y-o-y and 19% m-o-m.

This implies 1HFY2026 SDAV being 11% above Jaiswal’s estimate.

SGX made a mention that liquidity in small- and mid-caps surged 94% m-o-m to $261 million, driven by retail participation and six consecutive months of institutional net buying.

Jaiswal expects this momentum to persist on a full-year basis, supported by regulatory initiatives to broaden equity participation beyond Straits Times Index (STI) constituents. “We forecast y-o-y SDAV growth of 8.8%, 5.0% and 5.0% for FY22026 to FY2028.”

In July, SGX welcomed NTT DC REIT and Info-Tech Systems to the Mainboard, Lum Chang Creations to the Catalist board and the secondary listing of China Medical System.

SGX expects heightened IPO activity with some 30 firms in the pipeline, twice Jaiswal’s assumption of 15 in FY2026 and 10 in each of the following two financial years.

Derivatives data

Meanwhile, SGX’s derivatives volume climbed 25% y-o-y and 12% m-o-m to 29.3 million contracts, with derivatives daily average volume (DDAV) 23% higher y-o-y and 1% higher m-o-m at 1.28 million.

This implies 1HFY2026 DDAV at 7% above Jaiswal’s estimate.

Positive surprises came from fixed income, currency & commodities (FICC) derivative contracts, with commodities volume hitting a record 9 million — up 76% y-o-y — on strong iron ore, freight, and petrochemicals trading.

Jaiswal forecasts DDAV growth of 7.9%, 9.9% and 10.1% for FY2026 to FY2028.

Stretched valuation

For more stories about where money flows, click here for Capital Section

According to Jaiswal, SGX’s valuation “appears stretched” unless July’s strong data can be “sustained and annualised”.

SGX’s share price has risen 29% year to date and 53% over the past 12 months. “While its forward P/E remains below that of Asian peers, securities turnover also lags behind,” adds the RHB analyst. “We expect continued growth in trading activity, and maintain our valuation at a target price-to-earnings (P/E) of 23.5 times.”

Jaiswal is relatively bullish, with his FY2026 to FY2028 profit forecasts 4.6%, 5.6% and 5.6% above that of the consensus.

SGX has proposed a 0.25-cent increase in its dividend every quarter from FY2026 to FY2028. This is subject to SGX’s shareholders’ approval at its annual general meeting (AGM) to be held on Oct 9.

Should the proposed increase go through, FY2026 will see a total dividend payout of 44.5 cents, while FY2027 and FY2028 will see total dividends of 48.5 cents and 52.5 cents per share respectively.

“Although management has guided for higher dividends and our estimates are more optimistic, the implied FY2026 dividend yield of 2.8% remains well below the market average of 5%,” notes Jaiswal.

As at 1.17pm, shares in SGX are trading 10 cents lower, or 0.62% down, at $16.15.

Read about SGX’s FY2025 results: