The Business Times

Brokers' take: Phillip downgrades SGX to 'neutral', says growth prospects priced in

Jude Chan
Published Mon, Jul 26, 2021 · 11:10 AM

PHILLIP Securities has downgraded Singapore Exchange S68 : S68 0%(SGX) to "neutral" from "accumulate", as most positives have been priced in.

However, the research house has raised its target price to S$11.95, from S$11.25 previously, on the back of "stronger growth prospects" following SGX's acquisition of single-source and direct-to-market foreign exchange (FX) trading platform MaxxTrader.

The higher target price is pegged to a price-to-earnings ratio of 25 times, and implies an estimated dividend yield of 2.7 per cent for FY2021.

The MaxxTrader acquisition is part of SGX's plans to build an integrated FX ecosystem and marketplace facilitating global access to over-the-counter, or OTC, trading and on-exchange currency derivatives.

The addition of MaxxTrader will broaden SGX's customer base for both the buy-side and sell-side to over 200 institutional clients, including banks, hedge funds and broker-dealers.

The way senior research analyst Terence Chua sees it, the acquisition will further scale up FX as a pillar of growth for the bourse operator.


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"We see FX as a core, fast-growing pillar in SGX's multi-asset strategy. The deal follows SGX's full acquisition of cloud-based FX trading platform BidFX last year. The two purchases have paved the way for the bourse to become Asia's largest one-stop venue for international FX OTC and futures participants," Mr Chua said in a report on Sunday.

"As a single-source and direct-to-market FX trading platform, MaxxTrader is expected to advance SGX's ability to offer end-to-end FX platforms and solutions," he added. "It will help the bourse achieve scale and size."

SGX will acquire MaxxTrader from multi-asset execution and order management systems provider FlexTrade Systems for a cash consideration of US$125 million, which will be funded by external borrowings.

The acquisition will be accretive to adjusted earnings per share from the first year.

"With continued fast growth in the global OTC FX market, MaxxTrader's average daily volume is expected to grow at more than 25 per cent in the medium term. This implies its revenue growth could accelerate from its historical 14 to 15 per cent compound annual growth rate in the last five years," Mr Chua said.

SGX shares closed 0.85 per cent or S$0.10 higher at S$11.90 on Monday.

The counter, which has climbed 22.7 per cent year to date, is currently trading at its highest level since 2008.

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