Introduction

The Singapore Exchange (SGX) has continued to make waves in the financial sector, reporting record-high earnings for the first half of FY2025 (1HFY25). The company’s performance has been driven by broad-based growth across all its business segments, showcasing its resilience and adaptability in an uncertain economic environment. This report by UOB Kay Hian dives deep into SGX’s financial performance, segmental growth, and the outlook for the future, providing a comprehensive analysis for investors.

SGX Overview

Singapore Exchange owns and operates Singapore’s securities and derivatives exchange along with their related clearing houses. It also provides ancillary securities processing and information technology services to financial sector participants. As of now, SGX has a market capitalization of S\$13.6 billion (US\$10.1 billion) with its share price hovering at S\$12.71 and a target price revised upwards to S\$12.58.

1HFY25 Financial Performance Highlights

Record-High Revenue and Profit Growth

SGX reported a record-high revenue of S\$682.2 million for 1HFY25, marking a 15.2% year-on-year (yoy) increase. Adjusted profit after tax and minority interests (PATMI) soared by 27.3% yoy to S\$320.1 million. The impressive growth spanned all business segments, with cash equities and equity derivatives outperforming significantly.

Key Financial Metrics

• Turnover: S\$682.2 million (+15.2% yoy)
• EBITDA: S\$425.3 million (+23.4% yoy)
• Operating Profit: S\$383.2 million (+29.4% yoy)
• Adjusted PATMI Margin: 46.9% (+4.4 ppt yoy)

Dividend Growth

SGX declared an interim quarterly dividend of 9.0 Singapore cents per share, up from 8.5 cents in the previous quarter. Total dividends for 1HFY25 stand at 18.0 cents per share, aligning with management’s goal of mid-single-digit compound annual growth rate (CAGR) in dividends over the medium term. For FY25/26/27, dividends are forecasted at 36.5, 38.5, and 40.5 cents per share, respectively, translating to yields of approximately 3%.

Segmental Performance Analysis

1. Cash Equities: A Sharp Rebound

The cash equities segment witnessed a strong recovery with revenue surging 21.9% yoy to S\$194.5 million. Securities daily average value (SDAV) rose by 31.2% yoy to S\$1.3 billion, while overall clearing fees increased to 2.57 basis points (bp) from 2.45 bp in 1HFY24. Trading and clearing (T&C) revenue grew by 39.4% yoy to S\$107.6 million, driven by heightened trading activity.

Looking ahead, anticipated interest rate cuts in 2025 and potential regulatory changes by the Monetary Authority of Singapore (MAS) to revitalize the domestic stock market are expected to further boost this segment.

2. Equity Derivatives: Consistent Growth

The equity derivatives segment recorded 19.8% yoy revenue growth to S\$192.5 million. Total traded volumes rose by 17.4%, driven by key contracts such as:

• FTSE China A50 Index futures (+29.6% yoy)
• GIFT Nifty 50 Index futures (+17.4% yoy)
• MSCI Singapore Index futures (+3.8% yoy)

Despite stable average fees per contract (S\$1.30), the segment benefitted from broad-based volume growth and is expected to maintain positive momentum amid macroeconomic uncertainty.

3. FICC (Fixed Income, Currencies, Commodities): Steady Expansion

The FICC segment posted a 13.8% yoy revenue increase to S\$172.9 million. Highlights include record-high trading volumes in commodities (+14.5% yoy) and currency derivatives (+43.2% yoy). The OTC forex (FX) segment saw T&C revenue grow by a robust 35.7% yoy, supported by strong demand for iron ore futures and key currency pairs.

Future growth in this segment is likely to be driven by increased participation and demand for risk management solutions in volatile markets.

4. Platform and Others: Stability Amid Growth

The platform and others segment grew modestly by 1.8% yoy to S\$122.2 million. Revenue gains in market data (+3.8% yoy) and connectivity (+8.7% yoy) subsegments were partially offset by a decline in indices and others (-3.7% yoy).

Outlook and Valuation

UOB Kay Hian maintains a “HOLD” recommendation on SGX with a revised target price of S\$12.58, up from S\$11.83. The target price is based on a 22x price-to-earnings (PE) multiple, aligned with SGX’s historical forward average mean to FY25 earnings.

While SGX remains a resilient business capable of weathering global economic uncertainties, the current valuation appears fair with limited near-term catalysts. Investors are advised to wait for better entry points and further clarity from the MAS review group’s upcoming announcements regarding the domestic stock market.

Potential Catalysts

• Prolonged trading volatility
• Higher-than-expected SDAV and derivatives daily average volume (DAV)
• Earnings-accretive acquisitions

Key Financial Projections

SGX’s financial outlook for FY25-27 includes steady growth in turnover, EBITDA, and net profits:

• FY25 Turnover: S\$1,344 million (+9.1% yoy)
• FY25 Adjusted PATMI: S\$612 million (+16.1% yoy)
• FY25 Dividend Yield: ~3.0%

Net margins are projected to remain stable at around 47%, while return on equity (ROE) is expected to decline moderately from 30.4% in FY25 to 26.0% in FY27.