Broker Take: Analysts Increase SGX Target Price; see potential upward movement of 1.3-15.3%

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UPDATED Mon, January 25, 2021 – 6:22 p.m.

ANALYSTS raised their Singapore Exchange (SGX) price targets (TPs) after revising their forecast for the operator’s earnings for fiscal year 2021-22 higher.

This came after SGX had posted net income of S $ 239.8 million for the half year ended December 31, 2020, up 12.4 percent from S $ 213.3 million the previous year. In a listing on Friday, SGX announced that sales were increasing in all three businesses: stocks; fixed income securities, currencies and commodities; and data, connectivity and indexes.

DBS stuck with SGX, increasing TP of S $ 10.20 from S $ 8.40 as it believes valuations are « getting rich ». The research team has revised its result for the 2021-22 financial year up by 1 to 3 percent due to higher sales assumptions.

Phillip Securities Research has maintained its « accumulated » call to SGX with a higher TP of S $ 11.01 from S $ 9.45. The research team put their TP at a historical five-year average of 22.3 times the price-earnings ratio (P / E) versus the standard deviation of minus one previously given stronger growth prospects.

Revenue for the first half of 2021 was in line with Philips Securities expectations, but SGX earnings exceeded its estimate by 12 percent due to lower operating costs.

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The research team has increased its earnings estimates for fiscal 2021 by 8 percent to reflect full-year cost guidance from S $ 535 million to S $ 545 million.

CGS-CIMB reiterated its « Add » call to the Singapore exchange operator with a higher TP of S $ 11.61 from S $ 9 due to continued trading volumes in its forecast for fiscal year 2021. The successful migration of SGX’s customer base to its FTSE Taiwan Futures Offering promises to implement further initiatives to reduce the profit gap created by the expiration of the MSCI license.

The CGS-CIMB research team expects equity trading to continue into FY2021 given the low interest rate environment and macroeconomic uncertainty, which supports the demand for hedging. Due to higher trading volumes and contributions from Scientific Beta and BidFX, the company increased its earnings forecast for fiscal year 2021-23 by approximately 17 to 19 percent.

RHB and Maybank Kim Eng are sticking to their « buy » call for the stock. RHB increased its TP for SGX from S $ 10.30 to S $ 11.60 while Maybank KE increased its TP from S $ 10.77 to S $ 11.48.

RHB expects the trading scenes in both the equity and derivatives markets to be aided by a recovery in the global economy due to the wider availability of vaccines and continued portfolio risk management. As a result, it increased its earnings forecast for fiscal year 2021-22 by 4 to 9 percent as there was a higher average value for the daily value of securities.

The RHB research team has also set the forecast for fiscal 2022 earnings per share for SGX at 25x value for money to reflect its optimistic view of trading activity.

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

The research team found that derivatives volumes increased 4 percent year over year despite the exit from key MSCI contracts. In addition, newly introduced FTSE contracts seem to be gaining in importance.

« SGX’s ability to hold liquidity here is a strong indicator of the successful execution of its multi-asset platform, » said Maybank KE.

Broker Take: Analysts Increase SGX Target Price; see potential upward movement of 1.3-15.3%
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