• Keep NEUTRAL and SGD9.60 TP 5% upside. YTD-FY24F (Jun) operating data until Jan 2024 remains a mixed bag, with derivatives volume meeting estimates and securities trading data continuing to disappoint. Despite the weak securities trading data, we believe securities daily average value (SDAV) and cash equities revenue will see some improvement in 2HFY24F, amid recovering economic growth outlook and likely clarity on moderation in the interest rate outlook during 2HCY24, leading to increased interest in Singapore equities, especially REITs.

• Singapore was the second most actively traded equities market in ASEAN in Jan 2024. While the securities market turnover value increased 8% MoM to SGD20.6bn, which is a five-month high, the SDAV fell 19% YoY and 2% MoM to SGD935m. Singapore equities saw net buying by retail investors across index stocks, REITs, and small- and mid-cap stocks. The STI declined 2.7% MoM in Jan 2024. The market turnover value of ETFs gained 5% MoM to SGD291m. The Lion-Nomura Japan Active ETF, Singapore’s first active ETF, was listed with an AUM of SGD37m in Jan. Turnover of structured warrants and daily leverage certificates (DLC) climbed 57% MoM to SGD721m. SGX also saw the listing of Prosper Cap Corp on its Catalist board in Jan 2024. The implied FY24F SDAV, based on the YTD data, is still well below our estimate. We do not rule out the possibility of further downgrades to our FY24F.

• YTD derivatives data is tracking estimates. Derivatives traded volume rose 27% YoY in Jan 2024 to 24.6m contracts, the highest since Mar 2022, with strong increases across equities, FX, and commodities. Derivatives daily average volume (DDAV) climbed 6% MoM to 1.1m contracts, the highest since May 2022. The total equity index futures volume rose 11% YoY to 14.6m, a 10-month high. The total FX futures volume rose 57% YoY to 4.3m contracts, which was also a record high. Commodity derivatives traded volume climbed 82% YoY to 5.2m. The implied FY24F DDAV, based on YTD data for FY24, is in line with our estimate.

• Unexciting yield; valuation remains fair. Despite SGX’s declaring YoY higher dividends for 1HFY24 and also announcing plans to boost dividends by a mid- single-digit percentage in the medium term, its yield is below the STI’s forward yield of 5.8%. We continue to value SGX based on a 21x forward P/E, which is in line with its historical average. Our TP includes a 6% ESG premium to SGX’s fair value of SGD9.10. The stock is currently trading in line with its historical average P/E, which we deem to be fair.

Source: RHB Research - 15 Feb 2024