• Keep NEUTRAL, with new SGD10 TP from SGD9.60, 6% upside. Singapore Exchange reported Feb 2024 operating data; while the securities trading data remained weak, the derivatives volume continued to meet estimates. We cut our securities daily average value (SDAV) estimates, switch to a half- yearly forecast model, and incorporate the likelihood of a lower increase in operating costs for 2HFY24 (Jun) and lower capex guidance. We raise FY24F earnings by 2% and FY25F-26F earnings by 3-5% as we remain optimistic about improvements in FY25F-26F SDAV.

• Singapore remained the second most actively traded equities market in ASEAN in February. SDAV in February came in at SGD1.25bn (+13% YoY, +34% MoM). Total securities turnover value was SGD25bn (+13% YoY, +22% MoM) despite fewer trading days compared to January. Singapore saw a jump in retail activity, with the number of retail accounts that traded in February up 34% MoM, and at a 12-month high. SGX also saw the listing of Singapore Institute of Advanced Medicine Holdings on the Catalist board. Despite the recent month’s strength, YTD securities turnover value and SDAV are 8% and 10% below the same period last year. The implied FY24F SDAV, based on the YTD data, was 14% below our estimate. As such, we lower our FY24 SDAV estimate by c.12%.

• YTD derivatives data is tracking estimates. Derivatives traded volume rose 9% YoY in February to 21.9m contracts. Derivatives daily average volume (DDAV) climbed 9% YoY to 1.09m contracts. Both numbers were down 11% MoM and 2% MoM. SGX saw a strong increase in volume across equities, FX, and commodities. Adding to its derivatives portfolio, SGX plans to introduce short-term interest rate futures linked to the Singapore Overnight Rate Average (SORA) and Tokyo Overnight Average Rate (TONA) in the second half of 2024 as global investors increasingly seek more transparent and cost- effective tools to hedge and trade fluctuations in interest rates. YTD derivatives volume and DDAV are 5% and 4% above the same period last year. The implied FY24F DDAV, based on the YTD data, was a tab above our estimate. We increase our FY24 DDAV estimate by 0.6%.

• Valuation and dividends are still unexciting. SGX declared a higher YoY dividend for 1HFY24 and has announced plans to boost dividends by a mid- single-digit percentage in the medium term. We now estimate a gradual increase in DPS during the forecast years. Nevertheless, the estimated yield is still below the STI’s forward yield of 5.7%. We continue to value SGX based on a 21x forward P/E, which is in line with its historical average. Our TP includes a 6% ESG premium to a fair value of SGD9.40. The stock is currently trading a tad below its historical average P/E, but we see limited upside.

Source: RHB Research - 18 Mar 2024