RHB raised its target price on the Singapore Exchange (SGX) to S$11.70 from S$10.80 after the bourse’s August securities turnover data came in higher than estimates by the research house.
The new target is based on an estimated price-to-earnings ratio for FY2024 of 21 times. The research house maintained its “neutral” call on the counter.
On Tuesday (Sep 10), analyst Shekhar Jaiswal raised his profit forecasts for FY2025 to FY2026 by 5 per cent and 3.3 per cent, respectively, to account for higher securities daily average traded value (SDAV) estimates.
To recap, the bourse’s SDAV for August grew 28 per cent on the year to S$1.4 billion.
Jaiswal noted that the implied H1 FY2025 SDAV was “significantly above” RHB estimates.
“We expect the volatility in the securities market to persist for a few months as investors await clarity on the interest rate outlook and the outcome of the US elections,” he added.
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However, Jaiswal cautioned that the elevated SDAV should moderate in the second half of FY2025 once investors are clear on the interest rate and global economic growth outlook.
He also expects derivatives business’ revenue growth to significantly exceed the growth in securities business revenue in the long term.
This comes as the bourse’s derivatives business remains strong, said Jaiswal.
He explained that SGX’s total trading volume is “closely tracking” his implied H1 FY2025 estimate, while foreign exchange (forex) and commodity derivative volumes are exceeding his projections.
In August, total futures traded volume on the forex front rose 33 per cent on the year to 5.6 million contracts, while commodity derivatives traded volume rose 20 per cent to 6.1 million contracts.
For FY2025 to FY2026, Jaiswal expects SGX to see an increase in equity listings.
That said, Jaiswal highlighted that despite the bourse’s guidance of increasing dividends, he maintains his view that SGX’s forward yield of 3.3 per cent is “unexciting”.
Shares of SGX were trading up 2.6 per cent or S$0.29 at S$11.27 before the mid-day trading break on Tuesday.
