MAYBANK upgraded its call for the Singapore Exchange (SGX) to “buy” and raised its price target for the stock on Friday (Feb 7).
That comes after SGX on Thursday (Feb 6) posted a net profit of S$340 million for the first half ended December, up 20.7 per cent from S$281.6 million in the year-ago period. Investors poured into the stock on Friday, pushing the counter up 10.07 per cent by the close to S$13.99.
In a Thursday report, Maybank said that increased global geopolitical volatility, and monetary and fiscal uncertainty “should give SGX a competitive advantage as a deeply liquid risk management venue”.
Trade war volatility under US President Donald Trump’s administration could drive demand for the bourse’s platform given the “strong levels of liquidity offered in key instruments”, it said.
“One-month in to the Trump administration, trade war driven volatility and uncertainty – especially in Asia – is showing no signs of abating. In fact, risks are rising. We believe this could drive further demand for SGX’s platform,” said Maybank.
Maybank lifted its target price for the counter to S$14.16 from the previous target price of S$10.12 – 3.8 per cent above the price of S$13.64 that the counter was trading at as at 1.29 pm. The bank also raised estimates for the bourse’s profit after tax for FY2025 to FY2027 by 16 to 24 per cent, following its H1 earnings results.
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It said: “While a higher dividend is unlikely, positive tailwinds as a regional safe haven and risk management venue should positively catalyse SGX going forward.”
The “stronger cash equities velocity and derivatives demand” that drove the bourse’s better-than-expected H1 performance will likely persist and should make it a competitive trading venue, the bank added.
Maybank raised its estimates for the cash equities segment’s revenues for FY2025 to FY2027 as it thinks the segment could be boosted by its “strong operating leverage”.
IPOs
Noting the 9 per cent rise in SGX’s H1 securities daily average volume (SDAV) from the year-ago period, Maybank expects drivers behind the elevated SDAV – safe-haven flows amid geopolitical risks, higher rates and corporate capital returns – to persist moving forward.
That could catalyse IPOs, Maybank said. It is “optimistic” that the Monetary Authority of Singapore’s (MAS) equity market review could “revive volumes”.
The MAS’ market review group was set up in 2024 to revive the local stock market which has weathered a listing drought for several years. 2024 yielded only four IPOs, the lowest in more than a decade – making SGX South-east Asia’s worst-performing bourse for the year in terms of IPOs and funds raised.
In recent years, the SGX experienced a string of delistings, lost listings to other bourses – with companies such as Grab and Sea opting to list in the US – and faced competition from alternative fundraising methods such as private equity.
However, the bourse said in its earnings briefing on Thursday that it has observed improved momentum and is hopeful that 2025’s IPO’s will exceed the previous year’s.
The market review group is studying ideas to draw new listings, raise investor participation and improve the IPO process and aims to complete its report by August.
Maybank raised its forecast for the number of IPOs in FY2025 to 10 from its previous estimate of six and expects an IPO pipeline spanning larger real estate investment trusts (Reits), healthcare, and new economy candidates.
Remarking that the derivatives segment could be boosted by volatility, Maybank has upped its estimates for fixed income, currencies and commodities derivatives revenues by 5 to 11 per cent.
RHB maintains “neutral” call on “moderate” earnings outlook
RHB analyst Shekhar Jaiswal reiterated his “neutral” rating on SGX, citing H1 core profit that was “in line with estimates”. He foresees the bourse’s profit after tax and minority interests declining in H2 and its earnings growth moderating beyond FY2025.
In a Friday report, Jaiswal stressed that any “material improvement in SGX’s moderating earnings growth outlook” would depend on numerous factors that are “difficult to pencil into our estimates right now”.
These include elevated local equity market sentiment, an increase in new IPO listings, successful new product launches, earnings-accretive acquisitions, and a favourable outcome for the ongoing market review exercise.
“While we expect the SDAV to remain flat, the derivatives volume should continue to grow during FY2026 to FY2027”, said Jaiswal.
Fixed income, currencies, and commodities revenue should clock a 12 per cent compound annual growth rate for FY2024 to FY2027, he said.
