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■ We reduce our earnings by 2-3% after reviewing October 2015 volumes, with weaker volumes in both equities and derivatives (China A50) trends; but market was up 7%.
Key trends in October 2015 were:
(1) Equity markets (30% of revenue): October's average daily turnover (ADT) was up 1% YoY at S$1.05 bn and down 7% MoM. November so far is weaker, tracking below S$1 bn.
(2) Derivatives markets (35%): Derivatives volumes were up 6% YoY in October 2015, but down 19% MoM. The momentum slowed due to weaker China A50 volumes (-21% MoM), with a pick-up in November.
(3) Depository services (15%): These fees are more based on equity volumes than value, with volumes up 19% YoY in October 2015.
(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 the success of new product launches (i.e. forex products).
■ We leave our target price unchanged at S$10.00 and retain our OUTPERFORM rating. The current share price implies 22x 12-month forward earnings, noting strong yield support (~5%), with downside risk to earnings on equities. (Read Report)
Read Related Report
1) Singapore Exchange - Oct'15 market statistics: disappointing start to 2QFY16 by Deutsche Bank Markets Research, published on 6 November 2015
Source : Credit Suisse Asia Pacific Equity Research