RHB Group Research analyst Shekhar Jaiswal is remaining "neutral" on Singapore Exchange (SGX) as its implied full fiscal year securities daily average (SDAV) data and derivatives daily average (DDAV) based on data from July to August stood below his expectations.
SDAV saw a broad pick-up in August while DDAV stood flat y-o-y. To Jaiswal, SGX’s implied FY2023 SDAV and DDAV both stood below his estimates at 20% and 8% respectively.
Nevertheless, the analyst is keeping his estimates unchanged for now as it is still early in the fiscal year.
At its current share price, SGX’s valuation is deemed “reasonable” by the analyst. Following its results announcement for the FY2022 ended June on Aug 18, SGX saw its share price decline, which brought its FY2023 P/E down to 21.7x. In the same announcement, the exchange had guided for higher expenses of around 7%-9% in the FY2023.
The new P/E, says Jaiswal, is in line with the stock's historical average since 2014.
At its present levels, SGX offers a modest and below-market dividend yield of 3.3%, he adds.
Jaiswal’s unchanged target price of $10.30 includes an environmental, social and governance (ESG) premium of 8% over its fair value of $9.50.
In his view, downside risks to SGX include higher-than-average operating costs for the FY2023 and a slower ramp-up in revenue contributions from acquisitions.
On the other hand, upside risks include a higher-than-average SDAV from the potential pipeline of exchange-traded funds (ETFs), REITs and Spac listings, as well as the continued global macroeconomic uncertainties leading to higher derivatives volumes.
As at 4.47pm, shares in SGX are trading 2 cents higher or 0.21% up at $9.57.
