Broker’s take: RHB raises SGX target price but says valuation, dividends ‘still unexciting’ 

RHB Research raised its target price on Singapore Exchange (SGX) : S68 0% to S$10 from S$9.60. 

The higher target price is based on a 21 times price-to-earnings ratio, in line with SGX’s historical average. It also includes a 6 per cent environmental, social and governance premium to a fair value of S$9.40. 

In a Monday (Mar 18) report, analyst Shekhar Jaiswal said he expects the bourse operator’s earnings in the year ahead to benefit from lower capital expenditure and a slowdown in operating cost increases for the second half of FY2024. 

Citing SGX’s year-to-date data, Jaiswal believes the group’s derivatives volume and derivatives daily average volume (DDAV) figures imply a FY2024 DDAV that is “a tab above” what RHB originally estimated. 

As a result, the analyst raised his FY2024 DDAV estimate for SGX by 0.6 per cent. 

His forecast for SGX’s FY2024 earnings was consequently raised by 2 per cent. 

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As the research house is optimistic about improvements in SGX’s securities daily average value estimates for FY2025 to FY2026, it raised its estimates for this period by 3 to 5 per cent. 

Jaiswal noted that while the stock is currently trading “a tad below” the historical ratio, he sees limited upside. 

Therefore, he remains “neutral” on the stock as he believes its valuation and dividends “remain unexciting”.

Though RHB estimated a gradual increase in dividend per share over its forecast years, Jaiswal pointed out that the projected yield range of 3.6 to 4 per cent from FY2024 to FY2026 is still below the Straits Times Index’s forward yield of 5.7 per cent. 

As at 2 pm on Monday, shares of SGX were trading flat at S$9.43.