What is of interest to the investing public is $5 billion in government funding to allocate to asset managers to deploy in the local market.
The funding might be deployed as early as by the last quarter this year, with a focus on smaller cap stocks outside of the Straits Times Index, and also those that are not REITs.
This funding, part of a broader set of measures to revive the local market, is deemed by analysts Llelleythan Tan Yi Rong and Heidi Mo as the most "impactful" to help boost valuations and improve trading liquidity.
Tan and Mo point out that 15-20% of historical SDAV of between $200 million and $300 million in the past three years belongs to non-index stocks.
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With this in mind, they have raised their patmi forecast for FY2025 to FY2027 by 1%, on the back of higher SDAV and forex futures assumptions.
In addition, they are applying a slightly higher valuation multiple of 23x FY2026 earnings, up from 22x now, leading to the higher target price of $14.08.
However, they are keeping their "hold" call as they see no near-term catalysts to justify a higher valuation.
Tan and Mo say they still like SGX for its "resilient business model" that benefits from the global economic uncertainty but reckon that the positives from the $5 billion funding have already been priced in. Plus, they are awaiting further clarity on what the MAS-led review group will announce in its next tranche of measures.
Separately, Shekhar Jaiswal of RHB Bank Singapore points out that while SDAV for May increased y-o-y, it was down 30% m-o-m.
Given this sequentially soft operating data, he estimates that for 2HFY2025 the implied securities turnover was 2% below his estimates, and similarly so for other product lines.
For now, he has left his earnings estimates unchanged.
His "neutral" call and target price of $14.10 is based on a blended FY2026 and FY2027 blended P/E multiple of 22x, above SGX’s 21x historical average forward P/E, as he expects MAS’s initiatives to only drive higher securities trading volumes in FY2026 to FY2027.
SGX shares changed hands at $13.97 as at 4.31 pm, up 0.79%.
