UOB Kay Hian (UOBKH) has kept its “hold” call and target price of $11.83 ahead of the Singapore Exchange ’s (SGX) results for the 1HFY2025 ended Dec 31, 2024. The exchange will release its results on the morning of Feb 6.
In its Jan 14 report, the UOBKH team says it is expecting SGX to report a strong set of numbers for the 1HFY2025, driven by outperformance across most of its business segments. Total revenue for the six-month period is tipped to increase by 15% y-o-y to $675 million while adjusted patmi is forecasted to come in at $290 million, 16% higher y-o-y.
The team noted that SGX’s total securities turnover value of $163 billion, which rose by 34.4% y-o-y, stood in line with its expectations.
“The robust y-o-y growth was largely due to increased trading velocity driven by lower US Fed interest rates, positive sentiment from China’s stimulus measures and increased retail investor participation at a two-year high,” the team writes.
With the exchange’s average clearing fee expected to increase on a y-o-y basis, the team is estimating SGX’s cash equities trading and clearing (T&C) revenue to be up by 36% y-o-y to $105 million.
SGX’s total derivatives traded volume, which stood 21.4% higher y-o-y, also came within expectations thanks to strong broad-based volume growth across the board. Total equity derivatives volumes rose by 17.9% y-o-y in the 1HFY2025 mainly driven by the SGX’s FTSE China A50 Index Futures, NSE IFSC Nifty 50 Index Futures and MSCI Singapore Index Futures, which increased by 29.6% y-o-y, 16.3% y-o-y and 3.8% y-o-y respectively.
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“With SGX’s average clearing fee per contract expected to be stable y-o-y, we reckon that this would lead to a steady 18% y-o-y increase in 1HFY2025 equity derivatives T&C revenue at around $145 million,” says the UOBKH team. “We maintain our expectations that an ongoing uncertain macroeconomic outlook would boost demand for risk management.”
SGX’s fixed income, currencies and commodities (FICC) segment came above UOBKH’s expectations with total foreign exchange (forex) volumes at record highs with a 43.3% y-o-y increase in 1HFY2025. The outperformance was driven by the three main currency pairs, the US dollar (USD)/Chinese yuan (CNH) futures, Korean won (KRW)/USD futures and Indian rupee (INR)/USD futures, which were up by 33% y-o-y, 103.7% y-o-y and 57.9% y-o-y respectively.
Following China’s stimulus announcement, SGX’s commodities segment rose by 14.5% y-o-y, mainly led by iron ore futures and SGX SICOM rubber futures, which were up by 14.7% y-o-y and 37.8% y-o-y respectively.
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On the back of the strong volumes seen in the 1HFY2025, UOBKH says it expects the FICC segment to continue its upward moment and post a 26% y-o-y growth in its revenue for the six-month period.
Ahead of SGX’s results, the UOBKH team expects its 1HFY2025 dividend payout ratio to be around 67% at 18 cents per share. The team also expects SGX’s FY2025 dividend per share to total 36.5 cents per share. The figure implies a 6% y-o-y increase in total dividends and a yield of 3%. The estimates come on the back of management stating that the group intends to increase its dividends per share in line with its underlying earnings growth and at a mid-single-digit compound annual growth rate (CAGR) target in the medium term.
In addition to its unchanged call and target price, the team has maintained its patmi forecasts for the FY2025 to FY2027.
“In our view, we reckon that there are no near-term catalysts to justify a higher valuation. Despite a lacklustre yield of about 3%, we like still SGX for its resilient business model that benefits from the global economic uncertainty but recommend waiting for better entry points,” it says.
As at 11.33am, shares in SGX are trading 1 cent lower or 0.08% down at $12.11.
