CGS International
July 8, 2025
Singapore Exchange (SGX): A Defensive Powerhouse Riding the Wave of Market Volatility
Executive Summary
In this in-depth analysis, CGS International upgrades Singapore Exchange (SGX) to an ADD with a fresh target price of S\$18.30, reflecting the company’s robust performance, resilience amid volatility, and upcoming catalysts that could drive further upside. With rising trading volumes, a favourable regulatory environment, and strong ESG credentials, SGX has emerged as a standout defensive play in the stockbroking and exchange sector. This article unpacks all the essential details, financials, peer comparisons, and outlook, providing investors with a clear roadmap for the years ahead.
SGX: Benefitting from Volatility and Regulatory Tailwinds
SGX is on track to post a core PATMI of S\$321.6m for 2HFY6/25 (up 17% year-over-year and 1% half-on-half), powered by exceptional trading volumes and surging demand for OTC FX products. The company stands to gain further from the Monetary Authority of Singapore’s (MAS) S\$5bn Equity Market Development Programme (EQDP), which is expected to stimulate trading activity through FY26 and FY27. With these tailwinds, CGS International upgrades SGX to ADD and raises the target price to S\$18.30, now pegged at 28x P/E (2 standard deviations above the 15-year mean), reflecting the stock’s defensive appeal and a projected FY25-27 earnings CAGR of 5.9%.
Strong 2H25 Performance: Revenue Growth Offsets Seasonal Cost Pressures
– SGX’s Securities Daily Average Value (SDAV) grew 22% year-over-year to S\$1.42bn for Jan-May 2025, with Derivatives Daily Average Volume (DDAV) up 13% year-over-year to 158.9m contracts in 2H25. – FX derivatives volumes soared 66% year-over-year to 33.9m contracts over the same period. – OTC FX product sales, closely tied to this growth, posted a 36% year-over-year increase in 1HFY25. – 2HFY25 net revenue is projected at S\$680.5m (+6% yoy, +5% hoh), comfortably offsetting higher seasonal operating expenses such as bonuses and stepped-up marketing. – This translates into an estimated core PATMI of S\$321.6m for 2HFY25 (+17% yoy/+1% hoh).
Regulatory Catalysts and Market Revitalization
– The MAS and the Financial Sector Development Fund (FSDP) launched the S\$5bn EQDP in February 2025, aimed at boosting SGX liquidity and trading activity. – While the capital injection is modest relative to historical SDAV (S\$1.17bn in FY15-24), government initiatives and new listings—such as Info-Tech Systems and NTT DC REIT—are expected to generate renewed investor interest and drive trading volumes.
Valuation Re-rating and Investment Thesis
– SGX’s defensiveness and earnings growth potential justify a re-rating, with the target price increased to S\$18.30 and the company upgraded to ADD. – The new valuation is set at 28x P/E—reflecting 2 standard deviations above the 15-year mean. – Key catalysts include announcements of capital return initiatives and further government measures to support equity market development. – Downside risks: Weaker trading volumes or a sharper-than-expected fall in treasury income due to rate cuts.
Key Financial Highlights
| Year Ended Jun |
2023A |
2024A |
2025F |
2026F |
2027F |
| 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% |
| Dividend (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% |
Guidance Analysis: Revenue and Expense Outlook
– SGX targets 6-8% annual revenue growth (ex-treasury income) over the medium term; CGS International forecasts 4.7%/5.6% for FY26F/FY27F, reflecting likely pressure from lower interest rates. – Trading and clearing fee growth in currencies and commodities is forecast at 15%/10% for FY26F/FY27F, supported by ongoing demand for currency products. – OTC FX revenue surged 35.7% yoy to S\$55.0m in 1HFY25, up from S\$40.5m in 1HFY24. – SGX’s ongoing investments in technology are expected to keep expense growth in the low-to-mid single-digit range, supporting long-term cost efficiency.
Trading Volume and Market Activity Trends
- Monthly SDAV (Securities Daily Average Value) reached S\$1.42bn in 2HFY25F, up from S\$1.16bn in 2HFY24 (+22% yoy).
- Derivatives Daily Average Volume (DDAV) climbed to 26.5m contracts in 2HFY25F, up 13% yoy.
- FX derivatives volume hit 33.9m contracts Jan-May 2025, up 66% yoy.
Peer Comparison: How SGX Stacks Up
| Company |
Price (LC) |
Target Price (LC) |
Market Cap (US\$m) |
Core P/E 2025 |
Core P/E 2026 |
P/BV 2025 |
P/BV 2026 |
ROE 2025 |
ROE 2026 |
EV/EBITDA 2025 |
EV/EBITDA 2026 |
Div. Yield 2025 |
Div. Yield 2026 |
| Singapore Exchange |
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 |
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% |
| HK Exchanges & Clearing |
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 (not rated) |
90.55 |
n/a |
51,987 |
28.2 |
25.4 |
4.3 |
4.2 |
15.0% |
15.7% |
21.0 |
19.4 |
1.2% |
1.3% |
| Deutsche Boerse (not rated) |
274.3 |
n/a |
60,473 |
24.1 |
22.5 |
4.3 |
3.8 |
17.9% |
17.4% |
16.2 |
15.4 |
1.6% |
1.7% |
| CME Group (not rated) |
282.6 |
n/a |
101,820 |
25.3 |
24.3 |
3.6 |
3.6 |
13.4% |
13.1% |
21.2 |
20.4 |
3.9% |
3.9% |
ESG Leadership: Sustainability as a Value Driver
SGX holds a B+ combined ESG rating, underpinned by an A- in governance, and demonstrates leadership in sustainability through its SGX FIRST (Future In Reshaping Sustainability Together) framework. Highlights include:
- Active integration of ESG across equities, fixed income, indices, and commodities.
- Participation in Climate Impact X, advancing the global carbon credit market.
- Commitment to social initiatives, such as target training hours (34 achieved in FY24, aiming for 40), and diversity programs.
- Consistent ESG scores since FY16, with room for further improvement in environmental and social pillars.
Investors with a focus on sustainability are likely to view SGX at a premium as it continues to progress on these fronts.
Key Ratios and Balance Sheet Strength
- Revenue Growth: 7.7% (FY25F), 4.7% (FY26F), 5.6% (FY27F)
- Operating EBITDA Margin: 64.7% (FY25F), 64.9% (FY26F), 65.1% (FY27F)
- Net Cash Per Share: S\$0.52 (FY25F), S\$0.68 (FY26F), S\$0.87 (FY27F)
- Book Value Per Share: S\$2.01 (FY25F), S\$2.25 (FY26F), S\$2.52 (FY27F)
- Return on Invested Capital: 44.2% (FY25F), 44.0% (FY26F), 43.8% (FY27F)
- Equity SDAV: S\$1,300m (FY25F), S\$1,400m (FY26F/FY27F)
- Total Derivatives Trading Volumes: 287.1m (FY25F), 301.4m (FY26F), 316.5m (FY27F)
Conclusion: SGX’s Strategic Position and Investment Appeal
SGX’s impressive growth in trading activity, successful navigation of market volatility, and forward-thinking regulatory and ESG initiatives position it as a premier defensive asset in the region. With earnings and dividend growth, robust financials, and a strong governance framework, SGX is primed for continued re-rating and offers attractive upside for investors searching for stability and growth in the financial sector.
Recommendation Framework
- Add: Total return expected to exceed 10% over the next 12 months.
- Hold: Total return expected between 0% and 10%.
- Reduce: Total return expected to fall below 0%.
For SGX, an ADD rating is reaffirmed, reflecting a compelling risk-reward profile for both yield-seeking and growth-oriented investors.
