SINGAPORE (July 30): RHB Research is maintaining Singapore Exchange at “buy” with target price $9, pegged to 24 times FY19F earnings.
RHB is forecasting FY19 SADV (securities average daily value) of $1.39 billion on higher trading volume from market volatility and FY19 DADC (derivatives average daily contract) of 821,000, which is 3% higher y-o-y.
RHB’s sensitivity analysis also shows that even if FY19F SADV was lower by 20% at $1.11 billion, SGX would trade at around $7.81.
“Our $9 target price is based on 24 times FY19F earnings. Our DCF valuation gives supporting fair value of $9.06,” says analyst Leng Seng Choon in a Monday report.
RHB also forecasts FY19F dividend yield of 4.4% which is higher than the Singapore sovereign 10-year bond yield of 2.42%.
To recap, SGX reported FY18 earnings rose 7% from a year ago while SADV increased 12% to $1.26 billion. FY18 derivatives revenue surged 12% y-o-y, contributing 40% of total revenue.
See: Singapore Exchange posts FY18 earnings of $363 mil, highest in five years
For 4Q18, SGX’s earnings was $83.7 million, 2% lower from 4Q17, while FY18 earnings of $363 million met RHB’s expectations. This came on 4Q18 securities average daily value (SADV) of $1.29 billion , up 11% from a year ago.
SGX also declared a final dividend of 15 cents/share, giving FY18 total dividend of 30 cents. SGX is revising the dividend policy from percentage of net profit to absolute amount.
It would pay a higher quarterly dividend of 7.5 cents/share, starting 1Q19.
An annual 30 cents/share dividend equates to $321 million and SGX’s annual earnings for the past four years were higher than this.
If performance is good, SGX says dividends can be higher.
As at 12.42pm, shares in SGX are down 13 cents at $7.44 or 20.1 times FY19F recurring earnings.
