Brokers' take: Analysts mostly positive on SGX acquiring BidFX

THE Singapore Exchange's (SGX) move to acquire BidFX is largely deemed positive by analysts in separate research notes on Tuesday. 

This comes as the move looks to boost the bourse's market potential into over-the-counter (OTC) currencies beyond foreign exchange (FX) futures. BidFX is a cloud-based FX trading platform for institutional investors. 

While CGS-CIMB upgraded its call on SGX to "hold" from "reduce", analysts from RHB and DBS Group Research maintained their calls of "buy" and "fully valued" respectively.

All three analysts kept their target prices unchanged. RHB's target price is S$9.20, DBS's is S$7.40, while CGS-CIMB has a target price of S$8.

SGX shares were trading up S$0.25 or 3.1 per cent to S$8.31 as at 3.39pm. 

On the unchanged target price, CGS-CIMB analyst Ngoh Yi Sin said associated earnings loss from the recent price correction following SGX's MSCI licence termination has been priced in and will see little downside from the current level.

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"We like the transaction as a potential growth driver in the medium term, but it is unlikely to mitigate the near-term earnings gap left by the expiry of MSCI licensing in February 2021," Ms Ngoh noted.

The BidFX acquisition is seen as a positive step by RHB analyst Leng Seng Choon. With BidFX, SGX will be able to serve a wider FX community, he said in a research note on Tuesday.

He added that BidFX is "ahead of the curve" in developing sophisticated electronic FX trading and workflow solutions. Moreover, SGX has indicated that the acquisition should be earnings per share-accretive from fiscal 2021.

DBS analyst Lim Rui Wen said the move will allow SGX to move towards an integrated OTC FX and futures offering.

"SGX hopes to bring together the mutually reinforcing pools of liquidity in OTC and futures, where more than 25 per cent of BidFX's average daily volume is in Asian currencies," Ms Lim said.

The research house remains "fully valued" on SGX in the near term as it believes there is limited upside in the interim following the reduction of the MSCI licence agreement and near-term earnings catalyst.

With the full consolidation of BidFX, further synergies from research-based index firm Scientific Beta and potentially more bolt-on acquisitions, SGX's fixed income, currency and commodities and data, connectivity and indices segments could form one-third of revenue in three to four years, according to Ms Ngoh.