SINGAPORE (Jan 2): The Singapore Exchange’s derivatives segment could “disappoint” at its upcoming 2QFY20 results, according to RHB Securities.
This is because the bourse operator had recorded a 15% y-o-y drop in derivatives volume in October and November last year.
This is despite the 2QFY20 securities average daily value (SADV) was up a “respectable” 9% y-o-y, says RHB.
SGX is slated to release its results after market closes on Jan 23.
“We have conservatively assumed y-o-y flat FY20 derivatives average daily contracts given [the] recent slower China A50 Index futures trading, offset by stronger 1QFY20 commodities and currency derivatives,” RHB analyst Leng Seng Choon writes in a note dated Jan 2.
Nevertheless, RHB notes that SGX remains in a net cash position, with a monopoly over trading of Singapore-listed equities.
The broker has forecast SGX to declare a dividend per share of 31 cents in FY20 based on a payout ratio of 85%.
This translates to a FY20 dividend yield of 3.5%, which is higher than the Singapore sovereign 10-year yield of 1.71%, it says.
RHB raised its target price for SGX to $8.80 from $8.30 previously.
But it maintained its “neutral” rating for the stock given that the counter had priced in the positives arising from SGX’s derivatives business.
As at 12.39 pm, SGX was trading up one cent or 1.1% at $8.87.
