• Still NEUTRAL and SGD12.80 TP, 6% upside. 1HFY25 (Jun) securities turnover and derivatives trading volume were below estimates amidst a soft Dec 2024. Nevertheless, on a YoY basis, Singapore Exchange booked strong growth in 1HFY25 operating metrics, which we assess should translate into 15% PATMI growth during the same period. While we expect near-term market volatility to support YoY higher operating metrics in 2HFY25, we believe the growth rate should moderate. We see limited rerating catalysts, as SGX is already trading near to its historical average forward P/E.
• Dec 2024 data came in softer than expected. SGX reported Dec 2024 securities turnover and securities daily average traded value (SDAV) of SGD20bn (+5% YoY) and SGD0.95m (unchanged YoY), aided by a rise in the turnover for the financials (including REITs), industrials, utilities, and telecommunications sectors. SGX noted that retail participation in the cash market was at a 2-year high. Global policy actions like the US Federal Funds Rate cut and introduction of new policy measures by China kept investors interested in derivative products, with Dec 2024 derivatives volume of 23.2m contracts and derivatives daily average volume (DDAV) of 1.14m contracts increasing 10% and 4% YoY. However, on a MoM basis, both securities turnover and derivatives volume were down, losing momentum from the strong Nov 2024 data. The reported 1HFY25 securities turnover and derivatives volume came in 2% below our estimates.
• Strong earnings growth for 1HFY25. SGX will report its 1HFY25 results on 6 Feb before the market opens. Aided by a 34% YoY rise in securities turnover and 21% YoY rise in derivatives volume, we estimate SGX to report an operating revenue of SGD679m (+14.6% YoY) and PATMI of SGD323m (+14.7% YoY). We would like to highlight that our operating revenue estimate has not yet been adjusted for transaction-based expenses. Starting from 1HFY25, SGX will move transaction-based expenses, ie processing and royalties, from opex and will net them off against operating revenue. We also expect it to announce 17.5 SG cents per share for interim dividends along with the results.
• Unchanged thesis. We expect markets to remain volatile and continue to look for direction as investors await clarity on the potential impact of Donald Trump's policy initiatives on economic growth and interest rates. We have included our FY25F earnings and TP sensitivity analysis in this report. SGX's forward yield of 3% remains unattractive and well below the market yield of 5.2%. Our investment thesis and valuation basis remain unchanged. Our TP includes a 4% ESG premium to our assessed fair value for the stock.

Source: RHB Research - 14 Jan 2025