Derivatives Continue To Support Growth for Singapore Exchange

Our forecasts for Singapore Exchange, or SGX, are adjusted slightly after the publication of its May monthly data. With 11 months of fiscal 2022 in the bag, we expect average turnover for the cash market to be lower by 5% for the full year, compared with last year; while anticipating higher volume for currencies and commodities derivatives to offset flat trading volume for equity related derivatives. New bond listings were also stronger in fiscal 2022. We assume revenue growth of 6% for fiscal 2022 and expect operating expense to be in line with earlier guidance of SGD 565 million to SGD 575 million. As noted at the first-half result, the absolute operating guidance was left unchanged even if the integration costs for MaxxTrader were added. This implies the underlying operating expense declined and we attribute this to management’s execution, and the scalability of the exchange business. Our fair value estimate of SGD 11.20 per share is reaffirmed and the exchange remains undervalued, in our view.