Besides providing shelter from the bigger swings suffered by other markets, Tay sees another reason to like SGX — the growing momentum in trading volume. “We believe the twin catalysts of volatility from global macroeconomic uncertainty and incremental liquidity injection as a result of the government’s equity market review could contribute to earnings upside from FY2026,” the analyst writes in his July 8 report.
Ahead of SGX’s 2HFY2025 results on Aug 8, Tay expects the bourse to report core patmi of $321.6 million, 17% higher y-o-y and 1% higher h-o-h, driven by strong trading volumes and demand for over-the-counter (OTC) foreign exchange (FX) products. Revenue for the second half of the year is likely to come in 6% higher y-o-y or 5% up h-o-h at $680.5 million, offsetting seasonally higher operating expenses (opex) due to the accrual of bonuses and increased marketing expenses in a new calendar year.
Tay also views the equity market review to be a “second wind” for SGX. While he viewed the Monetary Authority of Singapore’s (MAS) $5 billion injection as “not significant” compared to SGX’s securities daily average value (SDAV) of $1.17 billion for the past 10 financial years, he believes that a “further slew of measures” by the government could revitalise trading activity.
Recent and expected upcoming listings could attract investor interest to the overall equities market on SGX, boosting fees and trading volume, he adds.
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The analyst has increased his FY2025 to FY2027 projections for earnings per share by 6.3% to 12.2%. Revenue for FY2026 and FY2027 is projected to be $1.389 billion and $1.466 billion, respectively, putting SGX’s P/E at 23.82 and 22.52 times, respectively.
Coupled with a valuation rollover to FY2026, Tay’s raised target price is now pegged to 28 times P/E from 23 times previously.
“Given the variety of measures to spur trading volumes by the government, alongside volatility in global macroeconomic uncertainty, we think 6 to 8% revenue growth per annum over FY2025 to FY2027 is possible, although interest rate cuts would negatively impact treasury income, which could be a drag on group revenue for SGX,” says Tay.
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Tay isn’t alone. In his earlier note on July 7, Shekhar Jaiswal of RHB Bank Singapore has raised his target price for SGX $14.10 to $16. The analyst has maintained his “neutral” call on the stock’s recent share price rally.
However, following the June data reported on July 9, Jaiswal in his note on July 10 has slightly trimmed his target price to $15.90, based on a 23.5 times target P/E.
The securities turnover for June, according to Jaiswal, has been factored into his estimates. However, derivatives data suggested that 2HFY2025 volume will be 1.2% below his expectations.
“We continue to see benefits from elevated near-term market volatility and improvement in securities turnover, supported by MAS-led equity market initiatives,” says Jaiswal.
He expects the growth momentum to continue, with growing anticipation that the first round of fund deployment announcements could come later this month. However, he believes that the gains in SGX’s share price year-to-date has already priced in “much of this optimism.”
Jaiswal is expecting SGX to deliver more in terms of dividends. The exchange has a standing aim of delivering sustainable, growing dividends, with quarterly payments and guidance for a mid-single digit CAGR in dividend per share over the medium term, subject to earnings growth.
For FY2015 to FY2019, the payout ratio was above 85%; above 75% in FY2021 to FY2022, but fell to 69% in FY2020 with the pandemic in full swing. The ratio has been kept at 61% since.
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While Jaiswal expects the FY2025 payout ratio to stay flat, with rising cash balances, solid earnings, and no major mergers and acquisitions announced, he sees room for improvement. He expects SGX’s payout ratio to rise gradually to 75% by FY2027.
As such, he has raised his FY2026 and FY2027 dividend per share estimates by 22% and 34%. Even so, the FY2027 yield would be just 3.4%, which is below the market average of 4% or more which many STI stocks are yielding. “Unless SGX prioritises building a cash buffer, we believe it could distribute more to shareholders,” says Jaiswal.
Some analysts are more cautious. Citi Research analyst Tan Yong Hong is keeping his “sell” call but with a higher target price of $13.10 from $11.90 after the exchange reported its June operating numbers.
For FY2025, Tan is now expecting SGX to report a net profit of $649 million, up from its FY2024 net profit of $600 million. The analyst has forecast net profits of $656 million and $668 million for FY2026 and FY2027 respectively. The estimates are based on SGX sustaining its SDAV at $1.3 billion and derivatives daily average value growth of 5% from FY2025 levels. Tan’s new target price implies an FY2026 P/E of 22 times.
