Singapore Exchange

DMG & Partners Research

SINGAPORE Exchange's (SGX's) Q3 FY13 net profit of S$98 million (+26 per cent y-o-y; +28 per cent q-o-q) came in at the upper end of our estimate range but was in line with consensus, with nine-month FY13 net profit of S$248 million (+8 per cent y-o-y) accounting for 80 per cent of our and 77 per cent of consensus full-year net profit estimates.

As expected, SGX declared an interim DPS (dividend per share) of 4 cents (Q3 FY12: 4 cents), bringing YTD DPS to 12 cents (nine-month FY12: 12 cents). We forecast FY13 total DPS of 27 cents, similar to FY12.

We raised our FY13-14 net profit projections by 4 per cent per annum after lowering our operating cost projections.

Fair value raised to S$6.80 from S$6.50, based on unchanged target FY14 PE of 21x. SGX is currently trading at 2013 PE of 24.5x.

While not particularly excessive, we prefer Bursa Malaysia ("buy", 7.16 ringgit, TP: 7.50 ringgit) given cheaper valuations (2013 PE: 22x) and stronger earnings growth (2013 forecast: 14 per cent).

Furthermore, we note that April's ADT (average daily turnover) has softened to around S$1.26 billion, potentially suggesting that a weaker Q4 FY13 is in store. Thus, despite the commendable results, we have maintained our "sell" call on the stock.

SELL