Brokers' take: Analysts raise SGX target price; see potential upside of 1.3-15.3%

ANALYSTS have raised their target prices (TPs) for Singapore Exchange (SGX) after adjusting their forecasts higher for the bourse operator's FY2021-22 earnings.

This came after SGX posted a net profit of S$239.8 million for the half year ended Dec 31, 2020, up 12.4 per cent from S$213.3 million a year ago. In a bourse filing on Friday, SGX said it saw revenue increases across all three of its businesses: equities; fixed income, currencies and commodities; and data, connectivity and indices.

DBS maintained "hold" on SGX, with a raised TP of S$10.20 from S$8.40 as it believes valuations are "getting rich". The research team revised its FY2021-22 earnings upwards by 1-3 per cent on higher revenue assumptions.

Phillip Securities Research has maintained its "accumulate" call on SGX, with a higher TP of S$11.01 from S$9.45. The research team pegged its TP at a five-year historical average of 22.3 times price-to-earnings (P/E) ratio versus the minus-one standard deviation previously in view of stronger growth prospects.

Revenue for H1 2021 was in line with Philips Securities' expectations but SGX's earnings beat its estimate by 12 per cent on lower operating expenses.

The research team has raised its FY2021 earnings estimates by 8 per cent to incorporate full-year expense guidance of S$535 million to S$545 million.

CGS-CIMB reiterated its "add" call on the Singapore bourse operator, with a higher TP of S$11.61 from S$9 on sustained trading volumes in its FY2021 forecast. It said SGX's successful migration of its customer base to its FTSE Taiwan futures offering shows promise of executing other initiatives in narrowing the earnings gap left by the MSCI licence expiry.

The CGS-CIMB research team expects equity turnover to sustain over FY2021 given the low rate environment and macro uncertainty, supporting hedging demand. It raised its FY2021-23 earnings forecast by about 17-19 per cent on higher trading volumes and contributions from Scientific Beta and BidFX.

RHB and Maybank Kim Eng maintain their "buy" call on the stock. RHB raised its TP on SGX to S$11.60 from S$10.30, while Maybank KE increased its TP to S$11.48 from S$10.77.

RHB expects trading scenes in both equity and derivative markets to be supported by a recovery in global economies due to the wider availability of vaccines and continued portfolio risk management. As such, it raised its FY2021-22 earnings forecast by 4-9 per cent on higher securities daily average value assumption.

The RHB research team has also pegged its FY2022 earnings per share forecast for SGX to a price-to-earnings ratio of 25 times to reflect its sanguine view on trading activities.

For Maybank KE, higher contract pricing, strong equity market velocity and new product launches should continue to support earnings momentum and keep dividend visibility high.

The research team noted that derivative volumes increased 4 per cent on the year despite the exit of key MSCI contracts. Moreover, newly introduced FTSE contracts seem to be gaining traction.

"SGX's ability to retain liquidity here is a strong indicator of the successful execution of its multi-asset platform," Maybank KE said.

Shares of SGX closed at S$10.05 on Monday, down 0.4 per cent or S$0.04. This implies an upside of 1.5 per cent, 15.5 per cent, 15.4 per cent, 14.2 per cent and 9.6 per cent to the TPs of DBS, CGS-CIMB, RHB, Maybank KE and Philip Securities respectively.

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes