CGS International Securities
August 11, 2025

Singapore Exchange: Navigating Growth, Dividends, and Resilience Amid Shifting Markets

Executive Summary: High Conviction on SGX as a Multi-Asset Powerhouse

Singapore Exchange (SGX) delivered a solid performance for the second half and full fiscal year 2025. Despite facing pressure from lower treasury income due to declining interest rates, SGX reported broad-based revenue growth and robust trading activity. The company continues to innovate as a multi-asset platform and demonstrates a strong commitment to shareholder returns through progressive dividend policies and disciplined acquisitions. CGS International Securities maintains its high conviction “Add” rating, albeit with a slightly trimmed target price, and highlights several catalysts and risks for investors to watch.

Financial Highlights: Resilient Earnings and Dividend Upside

• 2HFY25 PATMI: S\$308.0 million, in line with estimates, with FY25 PATMI forming 97.6% of CGS International’s forecast and 101.2% of Bloomberg consensus.
• FY25 Revenue: S\$1,298 million (+5.4% YoY)
• Net Profit: S\$648.3 million (+8.4% YoY)
• Dividend: Proposed 4QFY25 DPS of 10.5 Singapore cents; commitment to increase DPS by 0.25 Scts every quarter for 12 quarters (FY26F–FY28F).
• Target Price: Lowered to S\$17.70 (from S\$18.30) due to lower treasury income forecasts.

SGX’s Multi-Asset Platform: Growth Engines and Cross-Selling Success

SGX’s transformation into a multi-asset platform is yielding dividends. The bourse reported:

• Securities Daily Average Value (SDAV): Hit a 4-year high at S\$1.34 billion in FY25.
• Derivatives Volume: Grew 16.7% to 315.8 million contracts.
• Cross-Selling: 6% of new direct trading accounts added at least one more asset class, underscoring the appeal of SGX’s diverse offerings.
• Medium-Term Revenue Growth Target: 6–8% per annum over 3–5 years.

Shareholder Returns: Progressive Dividend Policy and Capital Discipline

SGX’s management has doubled down on maximizing shareholder returns while balancing growth:

• Quarterly DPS Growth: Commitment to increase DPS by 0.25 Scts each quarter for 12 quarters, adding 7 Scts in FY26F and 4 Scts in each of FY27F and FY28F.
• DPS Growth Guidance: 8.2–18.7% CAGR over FY26F–FY28F, surpassing previous mid-single-digit guidance.
• Strategic Acquisitions: SGX remains open to bolt-on acquisitions to expand its product suite but maintains a disciplined approach.

Earnings Outlook: Trimming Estimates Amid Lower Treasury Income

Despite the strong operational performance, lower interest rates are expected to weigh on treasury income. As a result, CGS International revised earnings estimates:

• FY26F EPS: Lowered by 3.9%
• FY27F EPS: Lowered by 2.7%
• Target Price: Reduced to S\$17.70 (from S\$18.30), reflecting the earnings revision but still reflecting premium valuations (28x CY26F P/E, 2 standard deviations above the 15-year mean).

Key Catalysts and Risks

Potential Catalysts:

• Announcement of fund managers for the remaining S\$3.9 billion under the Equity Market Development Programme (EQDP) by end-2025 could further re-rate the stock.
• Accretive acquisitions expanding SGX’s product range.
• Sustained or elevated levels of equities and derivatives volumes.

Risks:

• Significant drop in trading volumes.
• Sharp decline in treasury income from further interest rate cuts.

Peer Comparison: How Does SGX Stack Up?

SGX trades at a premium to regional peers in terms of P/E and EV/EBITDA, justified by its robust ROE and consistent earnings growth.

ESG Commitment: Sustainability as a Value Driver

SGX scored a B+ combined ESG rating from LSEG in 2024, with a standout A in Governance (47% weight). Its sustainability program, SGX FIRST, integrates ESG into its multi-asset offerings, and it is a founding member of Climate Impact X—a marketplace for high-quality carbon credits.

• Social Pillar: SGX targets 40 training hours per employee (34 achieved in FY24), aiming to boost diversity and talent retention. Progress here could enhance overall ESG scores and market perception.
• Governance: SGX is viewed as a regional leader in governance, benefiting from a disciplined management team and regulatory credibility.
• Consistency: Maintained B+ ESG scores from FY16 to FY24, with opportunity to strengthen Environmental and Social pillars for further rating upgrades.

Balance Sheet and Key Ratios: Financial Strength and Efficiency

• Total Cash and Equivalents (FY25A): S\$1,130 million
• Shareholders’ Equity (FY25A): S\$2,200 million
• Operating EBITDA Margin (FY25A): 63.8%
• Net Cash Per Share (FY25A): S\$0.47
• B/V per Share (FY25A): S\$2.05
• Net Dividend Payout Ratio (FY25A): 62.2%

Stock Performance and Major Shareholders

• Current Price: S\$16.02
• Target Price: S\$17.70 (upside: 10.5%)
• 1M/3M/12M Absolute Return: +2.8% / +11.4% / +63.1%
• Relative Return (vs SIMSCI): -0.3% / +3.1% / +20.2%
• Major Shareholders:
  • Blackrock: 5.0%
  • The Vanguard Group: 3.2%
  • Fidelity: 2.4%

Conclusion: SGX Well-Positioned for Growth and Resilience

SGX stands out as a multi-asset exchange with resilient earnings, robust shareholder returns, and a progressive approach to ESG. Bolstered by strong trading volumes, a disciplined capital strategy, and ongoing innovation, SGX remains a top pick for investors seeking exposure to Asia’s dynamic financial markets. While headwinds from lower treasury income persist, multiple catalysts—including further government support and accretive acquisitions—could unlock further value.
Recommendation: Add
Broker: CGS International Securities
Date: August 11, 2025