RHB Research raised its target price on Singapore Exchange (SGX) : S68 -0.11% to S$10 from S$9.60.

 

The higher target price is based on a 21 times price-to-earnings ratio, in line with SGX&rsquo s historical average. It also includes a 6 per cent environmental, social and governance premium to a fair value of S$9.40. 

 

In a Monday (Mar 18) report, analyst Shekhar Jaiswal said he expects the bourse operator&rsquo s earnings in the year ahead to benefit from lower capital expenditure and a slowdown in operating cost increases for the second half of FY2024. 

 

Citing SGX&rsquo s year-to-date data, Jaiswal believes the group&rsquo s derivatives volume and derivatives daily average volume (DDAV) figures imply a FY2024 DDAV that is &ldquo a tab above&rdquo what RHB originally estimated. 

 

As a result, the analyst raised his FY2024 DDAV estimate for SGX by 0.6 per cent. 

 

His forecast for SGX&rsquo s FY2024 earnings was consequently raised by 2 per cent. 

 

As the research house is optimistic about improvements in SGX&rsquo s securities daily average value estimates for FY2025 to FY2026, it raised its estimates for this period by 3 to 5 per cent. 

 

Jaiswal noted that while the stock is currently trading &ldquo a tad below&rdquo the historical ratio, he sees limited upside. 

 

Therefore, he remains &ldquo neutral&rdquo on the stock as he believes its valuation and dividends &ldquo remain unexciting&rdquo .

 

Though RHB estimated a gradual increase in dividend per share over its forecast years, Jaiswal pointed out that the projected yield range of 3.6 to 4 per cent from FY2024 to FY2026 is still below the Straits Times Index&rsquo s forward yield of 5.7 per cent. 

 

The Singapore Exchange S68 - (SGX) Group has reported a total securities market turnover value of $20.56 billion in January 2024, 6.6% lower y-o-y but 8.15% higher m-o-m.

 

January had a total of 629 listed securities compared to 632 in December 2023 and 647 in January 2023.

 

Total market capitalisation also fell to $773.78 billion, down 9.4% y-o-y and 3.56% m-o-m. That said, Singapore&rsquo s equities market remained the second-most actively traded in Southeast Asia with net buying seen by by retail investors across indices, REITs and small- and mid-cap stocks.

 

The market turnover value of exchange-traded funds (ETFs) fell by 19% y-o-y but grew by 5% m-o-m to $291 million in January. Singapore&rsquo s first active ETF, the Lion-Nomura Japan Active ETF was listed with assets under management (AUM) of $37 million in the same month. According to SGX, the ETF has attracted new net inflows of $10 million since its launch.

 

Turnover of structured warrants and daily leverage certificates (DLC) surged by 72.5% y-o-y and 57% m-o-m in January to S$721 million. The number of unique active accounts trading structured warrants grew 43% m-o-m, the highest since July 2021.

 

Meanwhile, derivatives daily average volume (DDAV) rose by 4.87% y-o-y and 9.26% m-o-m to 1.14 million contracts. Derivatives traded volume rose by 27% y-o-y and 16.1% m-o-m to 24.6 million contracts, the highest since March 2022. The higher volume came from strong increases across equities, foreign exchange (forex) and commodities, says SGX.

 

On SGX Equity Derivatives, total equity index futures volume rose 11% y-o-y in January to 14.6 million. The volume of SGX FTSE China A50 Index Futures increased 27% y-o-y to 9.4 million contracts, the highest since June 2022. The increase came amid heightened institutional risk management as China&rsquo s government took steps to support the economic recovery and reassure investors. The contract is the world&rsquo s most liquid international futures for Chinese equities.

 

The volume for SGX FTSE Taiwan Index Futures climbed 37% y-o-y at 1.6 million contracts in January. The increase came on the back of strong earnings from the technology sector. GIFT Nifty Futures volume gained 11% m-o-m to 1.7 million contracts, boosting daily average volume to a record US$3.6 billion ($4.86 billion) as global funds continued to be drawn to India.

 

Forex saw record activity on the SGX in January with total futures volume at 4.3 million contracts, 57% higher y-o-y. SGX USD/CNH Futures volume more than doubled to 2.6 million contracts while open interest in the contract reached a notional US$18.5 billion on Jan 22, a single-day record high. The SGX USD/CNH Futures is the world&rsquo s most widely traded international renminbi futures.

 

Open interest in SGX INR/USD Futures achieved a daily record of 167,221 lots on Jan 26 on increased portfolio hedging, ahead of the Indian government&rsquo s February announcement of its interim budget.

 

Commodity derivatives traded volume surged by 82% y-o-y to 5.2 million contracts while benchmark iron ore derivatives volume spiked by 88% y-o-y to 4.7 million contracts. Forward freight agreement (FFA) volume grew by 27% y-o-y. The volume of SGX SICOM Rubber Futures, the global pricing bellwether for natural rubber, rose 60% y-o-y to 247,091 contracts. Petrochemical derivatives volume more than trebled y-o-y.

 

On SGX fixed income, the exchange issued $24.3 billion from 60 new bond listings in January. These included a US$2.05 billion three-tranche bond offering by the Republic of Indonesia a US$2 billion three-tranche bond offering by The Export-Import Bank of Korea, which includes a three-year sustainability tranche a JPY200 billion ($1.79 billion) dual-tranche convertible bonds by Daiwa House Industry Co. and US$1.04 billion perpetual subordinated notes by Sumitomo Life Insurance Company.

 

As at end-January, the benchmark Straits Times Index (STI) closed at 3,153.01 points, 2.7% lower m-o-m.

THE Singapore Exchange (SGX) on Thursday (Feb 1) posted a 1 per cent year-on-year drop in net profit to S$281.6 million for its first half FY2024, from S$284.6 million.

 

Earnings before interest, taxes, depreciation and amortisation for H1 grew 3.2 per cent to S$344.6 million.

 

Earnings per share (EPS) stood at S$0.263, down from S$0.266 in H1 FY2023.

 

After adjusting for certain &ldquo non-cash and non-recurring items&rdquo that have less bearing on SGX&rsquo s operating performance, its net profit would have risen 6.2 per cent from S$237 million to S$251 million, and its EPS would be S$0.235.

 

Revenue for the half year increased 3.6 per cent to S$592.2 million, driven by higher revenues from the currencies and commodities segment, as well as the platform and others segment. This was, however, partially offset by lower contributions from cash equities and derivatives equities segments.

 

Loh Boon Chye, chief executive officer of SGX, said that muted global economic growth and geopolitical uncertainties may affect market sentiment in the year ahead.

 

&ldquo Nonetheless, the resilience of our multi-asset strategy, as well as healthy financial position and discipline, will enable us to capitalise on conditions across cycles.

 

Expanding solutions

&ldquo To drive growth, we will focus on expanding our solutions to capture opportunities in Asia, grow our emerging products and further strengthen our global distribution and network,&rdquo he added.

 

The fixed income, currencies and commodities (FICC) segment registered a 28.1 per cent increase in revenue to S$151.9 million, representing 25.6 per cent of the total revenue for H1.

 

Specifically, fixed income revenue was down 8.4 per cent to S$3.9 million. This consisted of S$2.5 million in listing revenue, which fell 1.4 per cent from the year-ago period, and S$1.4 million from corporate actions and other revenue, which dropped 19.1 per cent.

 

&ldquo There were 489 bond listings raising S$131.7 billion, compared with 449 bond listings raising S$104.3 billion a year earlier,&rdquo the bourse operator noted.

 

Currencies and commodities under FICC registered a 29.5 per cent increase in revenue to S$148 million. Commodities derivatives volume, in particular, increased 48.3 per cent.

 

At a briefing to discuss the company&rsquo s latest financial results, Ng Yao Loong, the chief financial officer of SGX Group, said that iron ore continued to be &ldquo a standout performer&rdquo in SGX&rsquo s commodities franchise as volume grew almost 50 per cent year on year.

 

Ng added that he expects the FICC segment to be on track to grow in its mid-teens percentage range over the medium term. 

 

Revenue from cash equities, which made up 26.9 per cent of total revenue, was down 5.6 per cent to S$159.6 million. Listing revenue, in particular, fell 3.3 per cent to S$14.6 million.

 

Revenue from derivatives equities declined 6.9 per cent to S$160.7 million.

 

Ng attributed the decline mainly to the drop in total equity derivatives volumes. He noted that Gift Nifty volume, which is SGX-traded futures on India&rsquo s NSE Nifty 50 Index, was down 39 per cent on a year-on-year basis. This was because SGX was in the process of migrating its members and clients to the Gift Connect.

 

Nevertheless, Loh said that he expects volumes of Gift Nifty contracts to normalise to pre-migration levels within the next 12 to 18 months.

 

Platform and others revenue, accounting for 20.3 per cent of total revenue, increased 8 per cent to S$120.1 million.

 

Total expenses rose 3 per cent to S$296.1 million, mainly from higher staff costs and technology costs, offset by professional fees and lower royalties due to the absence of Nifty royalties under the Gift Connect partnership.

 

&ldquo We are cautious on the near-term outlook as prospects for global growth appear muted. As such, we will remain prudent in managing our expenses and capital expenditure,&rdquo said SGX.

 

It expects expense growth in FY2024 to remain similar to the 3 per cent observed in the first half year.

 

&ldquo Our projected capital expenditure for FY2024 is anticipated to be within S$70 million to S$75 million, lower than our previously guided S$75 million to S$80 million range.&rdquo

 

On its existing convertible bond that is due in March this year, Ng said that SGX will consider &ldquo some form of refinancing&rdquo assuming the bond does not convert to equity. 

 

Market volatility

Loh noted that looking ahead, 2024 could be another year of uncertain economic backdrop. &ldquo While interest rates are starting to stabilise and possibly decline, geopolitics will continue to dominate and could dull economic growth globally. This could affect market sentiment and risk appetite.&rdquo

 

The record number of elections in major markets this year could also lead to some volatility in markets, he added.

 

&ldquo We are cautiously optimistic that investors will turn to our derivatives to manage portfolio risks.&rdquo

 

The board has declared an interim quarterly dividend of S$0.085 per share, payable on Feb 20. This brings total dividends in H1 FY2024 to S$0.17 per share.