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.

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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