CGS International
July 8, 2025
Singapore Exchange: A Defensive Play Poised for Growth Amid Market Volatility and Liquidity Boosts
Overview: SGX in the Spotlight as a Defensive Market Leader
Singapore Exchange (SGX) has emerged as a compelling defensive pick for investors seeking resilience and steady growth amid global market uncertainty. With robust trading volumes, rising demand for OTC FX products, and an anticipated liquidity boost from the Monetary Authority of Singapore’s (MAS) S$5 billion Equity Market Development Programme (EQDP), SGX’s prospects have been upgraded. The broker assigns an “Add” rating, raising the target price to S$18.30, a 20.7% upside from the current price of S$15.16.
Key Highlights and Investment Thesis
- 2HFY25F core PATMI forecasted at S\$321.6m – up 17% year-on-year and 1% half-on-half, buoyed by strong trading volumes and surging OTC FX demand.
- MAS’s S\$5bn EQDP – expected to generate a virtuous cycle, stimulating trading volumes and revitalizing SGX in FY26-FY27.
- Upgraded to “Add” – with a higher target price of S\$18.30 (from S\$13.20), reflecting a 28x P/E valuation, two standard deviations above the 15-year mean.
- Defensive profile confirmed – SGX projected to deliver an earnings CAGR of 5.9% for FY25-27, supporting ongoing valuation re-rating.
Trading Volumes Surge: Numbers Tell the Story
- Securities Daily Average Value (SDAV): Estimated to have grown 22% year-on-year to S\$1.42bn in 2H25F.
- Derivatives Daily Average Volume (DDAV): Up 13% year-on-year to 158.9 million contracts in 2H25F.
- FX Derivatives: Volume soared 66% year-on-year, reaching 33.9 million contracts (January–May 2025).
- OTC FX Products: Average daily value grew by approximately 36% year-on-year in 1HFY25, with FX derivative contracts up 44% in the same period.
These metrics translate to estimated 2HFY25F net revenue of S$680.5m (+6% yoy, +5% hoh), offsetting higher seasonal operating expenses driven by bonus accruals and increased marketing in the new calendar year.
MAS EQDP and Equity Market Review: Second Wind for SGX
The MAS and Financial Sector Development Fund (FSDP) announced the S$5bn EQDP in February 2025 to enhance market liquidity. While the incremental capital injection is modest compared to SGX’s historical SDAV, the government’s broader measures are expected to inject new life into SGX trading activity. Notable and upcoming listings, including Info-Tech Systems (ISTL) and NTT DC REIT, are likely to further attract investor interest and boost equities trading volume and related fees.
Valuation Upgrade: Defensive Strength Warrants Re-Rating
- Change in covering analyst to Tay Wee Kuang.
- FY25F-27F EPS raised by 6.3–12.2% on anticipated earnings upside from volatility and liquidity programs.
- Valuation rolled over to CY26F, with target price increased to S\$18.30, pegged to 28x P/E (previously 23x).
- Potential catalysts: New capital return initiatives or further government measures.
- Risks: Weaker-than-expected trading volumes or steeper declines in treasury income from interest rate cuts.
SGX Financial Performance: Key Figures and Growth Metrics
| Year Ending June |
2023A |
2024A |
2025F |
2026F |
2027F |
| Revenue (S\$m) |
1,194 |
1,232 |
1,327 |
1,389 |
1,466 |
| Operating EBITDA (S\$m) |
688 |
702 |
858 |
901 |
954 |
| Net Profit (S\$m) |
571 |
598 |
662 |
680 |
719 |
| Core EPS (S\$) |
0.47 |
0.49 |
0.60 |
0.64 |
0.67 |
| Core EPS Growth (%) |
11.3 |
4.5 |
22.0 |
6.0 |
5.8 |
| Dividend Per Share (S\$) |
0.33 |
0.34 |
0.36 |
0.38 |
0.38 |
| Dividend Yield (%) |
2.14 |
2.24 |
2.37 |
2.51 |
2.51 |
| ROE (%) |
31.0 |
28.7 |
30.7 |
28.9 |
27.3 |
Peer Comparison: Regional Exchanges at a Glance
| Company |
Ticker |
Rec. |
Price |
Target Price |
Market Cap (US\$m) |
P/E (2025/26) |
P/BV (2025/26) |
ROE (2025/26) |
EV/EBITDA (2025/26) |
Dividend Yield (2025/26) |
| Singapore Exchange |
SGX SP |
Add |
15.16 |
18.30 |
12,671 |
26.8 / 25.9 |
7.4 / 6.8 |
28.0% / 26.5% |
20.3 / 19.3 |
2.4% / 2.5% |
| Bursa Malaysia Bhd |
BURSA MK |
Add |
7.72 |
9.18 |
1,475 |
23.6 / 22.1 |
6.9 / 6.7 |
29.5% / 30.8% |
6.5 / 5.9 |
3.8% / 4.1% |
| Hong Kong Exchanges & Clearing |
388 HK |
Add |
408.2 |
520.0 |
65,928 |
31.6 / 29.0 |
9.1 / 8.7 |
29.7% / 30.6% |
34.4 / 32.5 |
2.8% / 3.1% |
| Nasdaq Inc |
NDAQ US |
Not rated |
90.55 |
na |
51,987 |
28.2 / 25.4 |
4.3 / 4.2 |
15.0% / 15.7% |
21.0 / 19.4 |
1.2% / 1.3% |
| Deutsche Boerse AG |
DB1 GR |
Not rated |
274.3 |
na |
60,473 |
24.1 / 22.5 |
4.3 / 3.8 |
17.9% / 17.4% |
16.2 / 15.4 |
1.6% / 1.7% |
| CME Group Inc |
CME US |
Not rated |
282.6 |
na |
101,820 |
25.3 / 24.3 |
3.6 / 3.6 |
13.4% / 13.1% |
21.2 / 20.4 |
3.9% / 3.9% |
Guidance and Forward-Looking Projections
SGX’s three-year guidance outlines 6–8% annual revenue growth (excluding treasury income), supported by greater government-driven trading volumes and persistent global macro volatility. While rising expenses are expected due to ongoing technology investments, SGX’s aim for low-to-mid single-digit percentage growth in expenses is deemed reasonable, given potential cost efficiencies over time.
ESG Performance: Commitment to Sustainability and Governance
SGX holds a B+ combined ESG score, with a strong A- in Governance. The exchange’s SGX FIRST initiative drives ESG integration across its multi-asset platform. As a founding member of Climate Impact X, SGX is also facilitating the growth of a global carbon credit market.
Key Social and Environmental Targets:
- Training hours per employee: 34 achieved in FY6/24, targeting 40 ongoing.
- Focus on diversity, employee retention, and transition assistance programs.
- Social pillar (39% weight in LSEG ESG score) improvement could further enhance SGX’s ESG standing and investor perception.
- Consistency in ESG metrics since FY6/16, with further scope for development in Environmental and Social areas.
Balance Sheet and Cash Flow: Strong Fundamentals
- Total cash and equivalents forecast to rise from S\$1,033m (Jun-23A) to S\$1,609m (Jun-27F).
- Shareholders’ equity set to increase from S\$1,701m (Jun-23A) to S\$2,783m (Jun-27F).
- Net cash per share projected to grow from S\$0.31 to S\$0.87 over the period.
- Operating EBITDA margin expected to strengthen from 57.6% to 65.1% by FY27F.
- Free cash flow to equity estimated to reach S\$654m in FY27F.
Key Risks and Catalysts
- Catalysts: New capital return initiatives and further government equity market measures.
- Risks: Weaker-than-expected trading volumes or sharper-than-anticipated drops in treasury income following interest rate cuts.
Shareholder Structure and Price Performance
- Major shareholders: SEL Holdings (23.4%), Tokyo Stock Exchange (5.0%), Blackrock (3.8%).
- Price performance (as of report date): 1M +5.7%, 3M +28.6%, 12M +58.2% (absolute); outperforming the SIMSCI index.
Conclusion: SGX Positioned as a Resilient, Growth-Oriented Exchange
SGX’s unique combination of defensive qualities, robust trading growth, and proactive government support through liquidity initiatives and market reforms underpins its attractiveness as a long-term investment. With upgraded earnings forecasts, a strong ESG profile, and a clear pipeline of catalysts, SGX is well-positioned to deliver outperformance for investors seeking stability and growth in Asia’s financial markets.
