RHB Bank Singapore analyst Shekhar Jaiswal expects the Singapore Exchange (SGX) to report “strong” earnings growth for 1HFY2025 ended Dec 31, 2024 on Feb 6.
Jaiswal also expects SGX to announce an interim dividend of 17.5 cents per share along with the first-half results, up from 17 cents per share in 1HFY2024.
Aided by a 34% y-o-y rise in securities turnover and 21% y-o-y rise in derivatives volume, Jaiswal estimates SGX will report an operating revenue of $679 million, up 14.6% y-o-y, and patmi of $323 million, up 14.7% yo-y.
Jaiswal also highlights that his operating revenue estimate has not yet been adjusted for transaction-based expenses. Starting from 1HFY2025, SGX will move transaction-based expenses, such as processing fees and royalties, from operating expenses and will net them off against operating revenue.
In his Jan 14 note, Jaiswal is maintaining “neutral” on SGX with a $12.80 target price, unchanged from his previous report from Sept 12, 2024. Jaiswal’s target price includes a 4% ESG premium based on RHB’s proprietary methodology.
See also: SGX posts 4.5% higher adjusted net profit for FY2024, raises quarterly DPS to 9 cents
1HFY2025 trading volume
1HFY2025 securities turnover and derivatives trading volume were below estimates amid a “soft” December 2024, notes Jaiswal. “Nevertheless, on a y-o-y basis, SGX booked strong growth in 1HFY2025 operating metrics, which we assess should translate into 15% patmi growth during the same period.”
While Jaiswal expects near-term market volatility to support y-o-y higher operating metrics in 2HFY2025, he believes the growth rate should moderate. “We see limited rerating catalysts, as SGX is already trading near to its historical average forward price-to-earnings (P/E).”
See also: SGX enjoys FX, iron ore derivatives boost in 1HFY2024; insists spac rules 'work'
Compared to SGX’s FY2024 P/E of 24.36 times with a June financial year-end, Jaiswal sees lower FY2025 P/E of 20.93 times and FY2026 P/E of 19.96 times.
Indeed, December 2024 data came in “softer than expected”, says Jaiswal. SGX reported December 2024 securities turnover and securities daily average traded value (SDAV) of $20 billion, up 5% y-o-y; and $0.95 million, unchanged y-o-y.
This was aided by a rise in the turnover for the financials, including REITs; along with industrials, utilities and telecommunications sectors.
SGX noted that retail participation in the cash market was at a two-year high. “Global policy actions like the US Federal Funds Rate cut and introduction of new policy measures by China kept investors interested in derivative products, with December 2024 derivatives volume of 23.2 million contracts and derivatives daily average volume (DDAV) of 1.14 million contracts increasing 10% and 4% y-o-y,” says Jaiswal.
However, on a m-o-m basis, both securities turnover and derivatives volume were down in December 2024, losing momentum from “strong” Nov 2024 data, says Jaiswal. “The reported 1HFY2025 securities turnover and derivatives volume came in 2% below our estimates.”
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Awaiting clarity
Overall, Jaiswal expects markets to remain volatile and continue to look for direction as investors await clarity on the potential impact of Donald Trump’s policy initiatives on economic growth and interest rates.
SGX’s forward yield of 3% remains “unattractive” and “well below” the market yield of 5.2%, he adds. “Our investment thesis and valuation basis remain unchanged.”
As at 4.20pm, shares in SGX are trading 11 cents lower, or 0.91% down, at $12.02.
Charts: RHB
