CGS International
Report Date: July 8, 2025
Singapore Exchange: Defensive Growth, Volatility Upside, and ESG Leadership Set the Stage for Outperformance
Introduction: SGX Poised for Re-Rating in a Volatile Market
Singapore Exchange (SGX) stands out as a compelling, defensive play in the Asian stockbroking and exchanges sector. Riding on a wave of robust trading volumes, surging demand for OTC FX products, and government-backed liquidity initiatives, SGX is positioned for sustainable earnings growth and a potential valuation re-rating. This article unpacks the latest analyst view from CGS International, detailing financials, catalysts, risks, ESG progress, and peer comparisons.
Key Investment Highlights: Upgraded to ‘Add’ with Higher Target Price
- Target Price Raised to S\$18.30: Upgraded from S\$13.20, reflecting a valuation rolled forward to CY26F and a higher P/E multiple of 28x—2 standard deviations above the 15-year mean.
- Defensive Earnings Profile: SGX’s earnings CAGR is forecast at 5.9% for FY25-27F, with core PATMI expected to reach S\$321.6m in 2HFY25F (+17% yoy/+1% hoh).
- Twin Catalysts: Market volatility and fresh government liquidity infusions (notably the MAS S\$5bn EQDP) are set to stimulate trading activity and fee income.
- Re-Rating Triggers: Capital return announcements and additional government measures, alongside a string of anticipated listings, could further boost sentiment.
SGX’s Financial Momentum: Trading Volumes and Revenue Growth
Trading Volume Surge
- SDAV (Securities Daily Average Value): Up 22% yoy to S\$1.42bn in 2H25F.
- DDAV (Derivatives Daily Average Volume): Increased by 13% yoy to 158.9m contracts in 2H25F.
- FX Derivative Products: Volume soared 66% yoy to 33.9m contracts during Jan-May 2025.
- OTC FX ADV: Grew approximately 36% yoy in 1HFY25, closely tracking the 44% yoy growth in FX derivatives contracts.
Revenue and Profitability
- 2HFY25F Net Revenue: Estimated at S\$680.5m (+6% yoy, +5% hoh), offsetting seasonal opex increases.
- 2HFY25F Core PATMI: Projected at S\$321.6m, up 17% yoy and 1% hoh.
- FY25-27F Revenue: Expected to rise steadily, leveraging strong FX and derivatives activity.
Key Financial Summary Table
| Year |
Jun-23A |
Jun-24A |
Jun-25F |
Jun-26F |
Jun-27F |
| Revenue (S\$m) |
1,194 |
1,232 |
1,327 |
1,389 |
1,466 |
| Operating EBITDA (S\$m) |
687.9 |
702.2 |
857.9 |
901.0 |
953.9 |
| Net Profit (S\$m) |
570.9 |
597.9 |
661.6 |
680.2 |
719.4 |
| 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% |
| FD Core P/E (x) |
32.20 |
30.81 |
25.24 |
23.82 |
22.52 |
| DPS (S\$) |
0.33 |
0.34 |
0.36 |
0.38 |
0.38 |
| Dividend Yield |
2.14% |
2.24% |
2.37% |
2.51% |
2.51% |
| P/BV (x) |
9.85 |
8.55 |
7.54 |
6.75 |
6.02 |
| ROE |
31.0% |
28.7% |
30.7% |
28.9% |
27.3% |
Government Initiatives: S\$5bn EQDP and Market Revitalization
- MAS S\$5bn EQDP: The Monetary Authority of Singapore and FSDP’s equity market development programme is expected to stimulate liquidity and trading volumes, especially in FY26F-27F.
- IPO Pipeline: New and upcoming listings (e.g., Info-Tech Systems, NTT DC REIT) are attracting investor attention and could further boost SGX’s equity market activity and fee base.
Expense Discipline and Profitability Outlook
- Expense Management: SGX targets low-to-mid single-digit percentage expense growth, investing in technology enhancements to drive long-term cost efficiency.
- Opex Seasonality: Expect higher expenses in 2H due to bonus accruals and increased marketing in the new calendar year, but strong revenue growth is set to more than offset this.
Valuation, Catalysts, and Risks
- Valuation Uplift: The target price upgrade is underpinned by improved EPS forecasts (up 6.3% for FY25F, 12.2% for FY26F, and 11.8% for FY27F), and a move to a higher valuation multiple.
- Re-rating Catalysts: Potential announcement of capital return initiatives and further government liquidity or regulatory measures.
- Risks: Downside includes weaker-than-expected trading volumes or a sharper-than-anticipated fall in treasury income if global interest rates drop.
Peer Comparison: Regional Exchanges at a Glance
| Company |
Ticker |
Rec. |
Price (lcl) |
Target (lcl) |
Market Cap (US\$m) |
CY25 P/E |
CY26 P/E |
P/BV (CY25) |
P/BV (CY26) |
ROE (CY25) |
ROE (CY26) |
EV/EBITDA (CY25) |
EV/EBITDA (CY26) |
Div. Yield (CY25) |
Div. Yield (CY26) |
| 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% |
ESG Performance: SGX’s Sustainability Commitment
SGX maintains a strong ESG profile, receiving a B+ combined ESG score in 2024, anchored by an A- Governance pillar score. Key sustainability initiatives include:
- SGX FIRST: Integrates ESG across equities, fixed income, indices, and commodities.
- Climate Impact X: SGX participates in this global exchange for high-quality carbon credits, supporting corporate carbon reduction efforts.
- Social Pillar: Focus on employee upskilling—34 training hours per employee in FY24, aiming for 40 hours ongoing.
- Leadership in Governance: SGX is recognized for disciplined management and regulatory excellence, often seen as a regional ESG benchmark.
- Future Upside: Further improvement in social and environmental pillars can lead to a higher overall ESG score, benefiting perceptions and possibly valuations among sustainability-focused investors.
Balance Sheet and Key Ratios: Robust Financial Position
- Total Cash & Equivalents (Jun-27F): S\$1.6bn
- Shareholders’ Equity (Jun-27F): S\$2.78bn
- Net Gearing: On a sharp downward trend, reaching -34.7% by Jun-27F.
- ROE: Sustained at an industry-leading 27.3% by Jun-27F.
- Operating EBITDA Margin: Expanding from 57.6% (Jun-23A) to 65.1% (Jun-27F).
SGX’s Forward Guidance: Achievable Targets?
- Revenue Growth: SGX guided for 6-8% annual growth (excl. treasury income) over the medium term. CGS forecasts are slightly more conservative, at 4.7%/5.6% for FY26F/27F, factoring in potential headwinds from lower treasury income due to interest rate cuts.
- Expense Growth: Targeted at low-to-mid single digits, supported by ongoing technology investments.
- Strong Currencies and Commodities Segment: 15%/10% yoy fee growth forecast for FY26F/27F, as global macro uncertainty and currency swings fuel demand for FX products.
SGX’s Shareholder Base and Market Activity
- Major Shareholders: SEL Holdings (23.4%), Tokyo Stock Exchange (5.0%), Blackrock (3.8%).
- Current Price: S\$15.16; Target Price: S\$18.30 (Up/downside: 20.7%).
- Free Float: 71.7%.
- 12-Month Price Performance: Absolute return of 58.2% and relative outperformance of 30.4%.
Conclusion: SGX Remains a Top Defensive Pick for Volatile Times
SGX is uniquely positioned to benefit from both cyclical volatility and structural reforms. Strong trading momentum, a growing FX franchise, prudent expense management, a robust balance sheet, and a credible ESG track record all support the case for further outperformance. The stock’s defensiveness, combined with multiple catalysts—government liquidity support, potential capital returns, and IPO momentum—make it a must-watch for regional and global investors seeking quality exposure to Asian financial markets.
Stock Rating Definitions
- Add: Total return expected to exceed 10% over the next 12 months.
- Hold: Total return expected between 0% and +10% over 12 months.
- Reduce: Total return expected to fall below 0% over 12 months.
Sector and Country Ratings
- Overweight: Above-market weight recommended relative to benchmark.
- Neutral: Neutral weight relative to benchmark.
- Underweight: Below-market weight recommended relative to benchmark.
