Singapore Exchange - Strong derivatives, with stable equity

We have left our forecast unchanged after reviewing May 2015 volumes, with strong derivative trends and stable equity volumes

Key trends in May 2015 were:
1) Equity markets (30% of revenues): May's average daily turnover (ADT) was down 2% YoY at S$1.2 bn, and down 9% on April 2015.

2) Derivatives markets (35%): Derivatives volumes were up 89% YoY in May-15, down 4% MoM and 53% above 2014 average driven by a strong China A50 contract.

3) Depository services (15%): These fees are more based on equity volumes than value, with volumes flat YoY in May.

4) Listings (10%): There were no equity listings in the month, with bond listings still the main source of new fund raisings.

Investment case
The key investment case for SGX is the longer-term growth through both existing market growth and success in its strategy to become an Asian regional gateway, with derivatives being the medium-term driver, in our view. Nearer term, its fortunes are more linked to current market volumes.

Catalysts: 
Market trading volumes, IPOs and subsequent capital raisings and success of new product launches (fx launched in derivatives).


Technical Analysis
Daily Chart
We left our target price unchanged at S$10.00 and retain our OUTPERFORM rating. The current share price implies 20x 12-month forward earnings, noting strong yield support (~4%). (Read Report)

Read Related Report
Singapore Exchange - Leadership vacuum filled; Buy despite trading weakness in May
Monday, 8 June 2015
- Deutsche Bank Markets Research

Source : Credit Suisse Asia Pacific Equity Research

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