RHB remains ‘neutral’ on SGX as securities trading data continues to disappoint

SGX’s securities turnover and SDAV came in “well below” analyst Shekhar Jaiswal’s FY2024 estimates.

RHB Bank Singapore analyst Shekhar Jaiswal is remaining “neutral” on Singapore Exchange S68 (SGX) after its disappointing set of numbers for its October market statistics.

“The disappointing market data from 1QFY2024 [ended Sept 30] for the cash equities business has trickled over to October,” writes Jaiswal in his Nov 17 report.

SGX’s securities turnover and securities daily average value (SDAV) came in “well below” Jaiswal’s FY2024 estimates despite the m-o-m increases. Both numbers remained lower on a y-o-y basis at $19.7 billion for total securities market turnover value and at $897 million for SDAV.

“The year-to-date (ytd) securities market turnover value and SDAV for FY2024 are tracking 10% and 11% below the numbers for the same period in FY2023,” the analyst notes. “The implied FY2024 SDAV, based on data through September, is 14.8% below our estimate.”

Derivatives volume also fell although the implied FY2024 derivatives daily average volume (DDAV) remains in line with Jaiswal’s estimates.

While the analyst has also kept his target price unchanged at $10.30, he notes that the group lacks near-term catalysts amid the uncertain macroeconomic outlook and the likelihood of a decline in interest rates in 2024. Annualising SGX’s current operating data would also lower Jaiswal’s target price estimate based on his sensitivity analysis to SDAV and DDAV.

That said, he sees fixed income, currencies, and commodities or FICC as growth drivers for SGX over the longer term.

“Despite SGX’s plans to boost dividends by a mid-single-digit percentage in the medium term, its yield is below the market yield of 5.6%. Our target price includes an 8% environmental, social and governance (ESG) premium to fair value (FV), which is based on 21x FY2024 P/E,” says Jaiswal.

As at 3.58pm, shares in SGX are trading 5 cents higher or 0.53% up at $9.49.

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