Singapore Exchange

CIMB Research on 2 Oct 2012

SINGAPORE Exchange's (SGX) share price tracked the market year to date and should not deviate much. Our "neutral" rating is unchanged in the absence of catalysts. Even as its Q1 2013 volumes picked up on mergers and acquisitions hype, the profitability needle has not moved much. Exchanges worldwide face a "volume" glass ceiling today, as macro uncertainty reigns. Our dividend discount model target price of $7.26 is unchanged.

The stock trades at 23.2 times 2013 PE, fair versus 25 times mean. During crisis, SGX can trough at 15.5 times PE. Our current estimates build in average daily value traded (ADVT) of $1.33 billion for FY2013. Consensus estimates are similar and factor in a sustenance of the current $1.4 billion ADVT. The quarter's activity was already propped up by the Thai Beverage/Fraser & Neave saga. The December quarter is traditionally slower. We think there is less likelihood of upward revisions to earnings.
NEUTRAL