Singapore Exchange Limited SGX: S68 - Soft Near-Term Earnings Outlook
NEUTRAL, new SGD10.40 TP from SGD10.00, 7% upside, as we roll forward our valuation basis to FY23F. While higher treasury income from US Federal Reserve (US Fed) rate hikes, as well as improved data, connectivity and indexes (DCI) and fixed income, currencies and commodities (FICC) revenue should support higher FY23F profit, FY22F earnings could remain soft amidst higher cost growth and a weak cash equities turnover. While global macroeconomic uncertainties could lead to better-than-expected trading volumes, we note the stock is trading above the historical average P/E.
YTD FY22 market statistics tracking our estimates. SGX has seen a YoY decline in cash equities turnover over the last two months (March and April). The securities daily average value (SDAV) came in at SGD1,554m (down 8% YoY) and SGD1,271m (down 1% YoY) respectively in March and April. This brings the YTD SDAV to SGD1,274m for FY22, which is c.5% higher than our FY22F SDAV of SGD1,219m. SGX’s derivatives segment saw a sharp uptick in trading activity, with average daily trading volumes (DDAV) of 1.14m (+11% YoY) and 1.04 (+25% YoY) in March and April. YTD DDAV is tracking c.2% below our FY22F estimates.
Our FY22 estimates are above consensus’. We estimate SGX will report SGD625m of EBITDA and SGD447m of profit in FY22F. This is higher than the consensus estimates of SGD608m and SGD434m, respectively. As our revenue estimate is in line with consensus’, we believe Street may be factoring in higher operating costs for FY22F.
Reasonable valuation; rolling forward the valuation to FY23F. SGX’s FY23F P/E is above its historical average (Figure 3) and offers a modest yield of 3.3% (STI’s yield is +4%). Our TP of SGD10.40 is now based on 22x (earlier 23x) FY23F (earlier FY22F) EPS. The TP includes an ESG premium of 8% over its fair value of SGD9.60. Our target P/E is now in line with its historical average P/E.
Including earnings and TP sensitivity on FY23 estimates. As the uncertain macroeconomic environment could persist well beyond Jun 2022 and likely boost SGX’s earnings, we have included the FY23F earnings and TP sensitivity analysis in Figure 1 and Figure 2.
Risks. Downside risks: i) Higher operating costs for FY22F; ii) slower ramp up in revenue contribution from recent acquisitions. Upside risks: i) Higher-than-estimated SDAV from the potential pipeline of ETFs, REITs, and Special Purpose Acquisition Company (SPAC) listings; and ii) continued global macroeconomic uncertainties leading to better-than- expected derivatives volumes.
Source: RHB Research - 27 May 2022
Singapore Investment
-
-
-
-
-
-
-
No new investment for retirees10 hours ago
-
-
-
What Is a Term Loan?10 hours ago
-
-
-
-
-
-
-
-
-
The Story Behind Maybank18 hours ago
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Portfolio Update Apr 20242 days ago
-
-
Portfolio Summary for April 20242 days ago
-
Portfolio (April 30, 2024)2 days ago
-
Summary of April 20242 days ago
-
-
Month of April 20242 days ago
-
-
-
A Blast From the Past2 days ago
-
-
-
-
-
-
-
-
Weekly Market Outlook4 days ago
-
-
OH! Kampong Gelam Art Walk5 days ago
-
-
That Restless Night…5 days ago
-
-
-
-
-
-
-
-
-
-
-
-
-
Keyboarding Warriors1 week ago
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Banks and Miles Report – Mar 20243 weeks ago
-
-
-
2024 (Portfolio Update)3 weeks ago
-
-
-
-
1Q 2024 Investment Strategy Update4 weeks ago
-
-
-
-
Lentor Hills Residences5 weeks ago
-
Burnt out!5 weeks ago
-
-
-
Feb 2024 Expenditure5 weeks ago
-
-
Starting Our Second Property Cycle1 month ago
-
-
-
-
-
-
-
-
The Market Is A Scam!2 months ago
-
-
-
-
-
-
-
-
Options Trading Journal Jan 20242 months ago
-
-
-
-
-
-
-
End of 2023 Review4 months ago
-
-
Year 2023 DIYQuant Portfolio Performance Report4 months ago
-
Monthly Summary of November 20235 months ago
-
3 Simple Poker Strategies for Beginners5 months ago
-
Migration of website5 months ago
-
-
Abandon REITS?5 months ago
-
-
-
-
-
-
-
-
-
August 2023 Portfolio Updates7 months ago
-
-
-
-
Hello SP Group, I'm Back!10 months ago
-
-
-
-
A New Light11 months ago
-
-
-
-
-
-
-
Demoralized1 year ago
-
2022 Thoughts, Hello 2023!1 year ago
-
Series of Defaults for Maple Finance1 year ago
-
Takeaways from “Sea Change”1 year ago
-
-
Greed is Coming Back1 year ago
-
-
-
-
-
-
-
-
-
-
-
What is Overemployment1 year ago
-
-
-
-
-
-
-
-
-
-
-