Brokers’ take: UOBKH downgrades SGX, slashes price target on lack of near-term catalysts

DESPITE noting robust contributions from forex and commodities derivatives to the Singapore Exchange’s (SGX) statistics for August, UOB Kay Hian (UOBKH) has downgraded its call on the local bourse to “hold” from “buy” while lowering its price target to S$10.04 compared to S$10.85 previously.

The revised target price implies a lower price-to-earnings multiple of 22.2 times SGX’s FY2023 earnings projections, down from the previous 23.5 times multiple as UOBKH reckons there are no near-term catalysts to justify a higher valuation.

Analyst Llelleythan Tan in a Thursday (Sep 15) report said that while he still likes SGX for its “resilient business model that benefits from global economic uncertainty” and a moderate yield of about 3 per cent, he recommends waiting for better entry points.

This comes as expectations of higher treasury income from interest rate hikes from H2 of FY2023 have already been priced in, said the analyst. 

“Although regulators from both sides (US and China) have recently signed an agreement to increase cooperation, we reckon alternative listing venues such as SGX would see increased demand as potential Chinese issuers shun the US capital markets. The recent listing of Shanghai-based electric vehicle firm Nio on SGX is a good start for the bourse,” he added. 

Tan, however, highlighted that homecoming dual listings would have “muted impact” on SGX’s earnings and target price.

Though a homecoming dual listing from Sea would have the highest impact among the 3 US-listed companies headquartered in Singapore (Sea, Grab and TCDX), this would be “insignificant”, in his view.

Based on Tan’s estimations, securities daily average value (SDAV) for Sea on the SGX would be around 5 per cent of the New York Stock Exchange’s due to the Singapore bourse’s lower trading liquidity.

He is also expecting the bourse’s overall SDAV to continue its downtrend after declining 11.6 per cent on a year-on-year basis in August, despite a strong 22.6 per cent increase from the previous month due to a resilient corporate earnings season.

SEE ALSO

Brokers’ take: UOBKH upgrades SGX to ‘buy’, expects robust H2 results

Singapore sees more US-listed Chinese companies coming to its shores

SGX H2 profit up 13.2% to S$232.7m, sees higher derivatives volume in FY22

As at 10.18 am on Thursday, shares of SGX were trading S$0.04 or 0.4 per cent lower at S$9.61.