Singapore Exchange

Keep ‘buy’ for SGX despite potentially weaker 2H21

The Singapore Exchange (SGX) could post a marginally weaker set of results for 2HFY2021 ended June 30, according to UOB Kay Hian.

This comes ahead of the bourse operator’s FY2021 results ended June 30, which are expected to be released on Aug 5.

The brokerage has forecast SGX to record a y-o-y decline of 0.3% and h-o-h decline of 0.3% in revenue to $572 million for 2HFY2021.

It has also forecast SGX to record a y-o-y decline of 8%, albeit with a h-o-h increase of 3%, in adjusted earnings to $235 million for the half-year period.

Nevertheless, there may be some bright spots.

“The aspect to watch out for would be contribution from the [company]’s Data, Connectivity and Indices segment which should see an increased contribution from its acquisition of Scientific Beta,” UOB Kay Hian analyst Lucas Teng writes in a note dated July 13.

For now, UOB Kay Hian has maintained its “buy” rating for the stock with an unchanged target price of $12.35.

The brokerage believes that SGX’s opportunities for growth lie in foreign exchange. As a result, it has forecast the company’s FY2020–FY2023 revenue to grow at a compounded annual rate of 9%.

SGX, it says, has highlighted the increasing usage of multi dealer platforms and electronic communication network (ECN) in the over the counter (OTC) markets.

The company is looking to set up an OTC electronic communication network anchored in Singapore, building an integrated forex offering that combines both forex futures and OTC forex offerings, it adds.