• Stay NEUTRAL and SGD10.40 TP, 8% upside. Although the June securities turnover data disappointed, Singapore Exchange reported a rise in 4QFY24 (Jun) securities daily average value (SDAV). The derivatives business continued to show strength with two consecutive quarters of sequential and YoY growth in derivatives daily average volume (DDAV). We continue to see limited upside in the near term amidst a lack of catalysts, as the estimated increases in SDAV and DDAV are likely well priced in. In addition, SGX’s forward yield of 3.7% remains unexciting.

• FY24 SDAV declined 4% YoY despite a strong 2HFY24 performance. SGX’s June SDAV came in at SGD1.1bn (-7% YoY, -13% MoM) after four consecutive months of c.SGD1.2bn data. Nevertheless, 4QFY24 SDAV was up 7% QoQ and 12% YoY. 2HFY24 securities turnover rose c.18% HoH. Thanks to this strong operating data, we expect cash equities revenue to increase by c.9% HoH. In 2HFY24, SGX noted that Singapore was the second most actively traded market in the ASEAN region during the June quarter (ie 4QFY24), as the STI advanced 3.4% QoQ, thanks to the strong share price performance by Singapore banks.

• The derivatives business remains strong. Total derivatives traded volume increased 5% YoY in June to 22.4m contracts, with DDAV of 1.18m contracts increasing by 10% YoY and 3% MoM. For FY24, DDAV came in at 1.09m contracts (+8% YoY). SGX continued to see robust trading activity in its FX and commodity derivatives business, the growth of which has been much stronger than its equity derivatives business. In 1HFY20, equity derivatives accounted for 80% of the total derivative volume, and 20% of the volume came from FX and commodities derivatives. This has changed to a split of 58% and 42% in 2HFY24. We expect growth in FX and commodity derivatives to continue to surpass growth in equity derivatives in the future.

• 2HFY24 earnings preview. SGX will be reporting its FY24 results after the market closes on 7 Aug 2024. On the back of strong operational data, we estimate 2HFY24 core PATMI at SGD259m (+4.4% HoH). Imputing the reported operating data for FY24 has led to a small (<1%) reduction in core FY24F-26F PATMI. We continue to value SGX based on c.21x forward P/E, which is in line with its historical average. Our TP includes a 6% ESG premium to its fair value of SGD9.80.

Source: RHB Research - 10 Jul 2024