SGX upgraded to Buy by OCBC after earnings beat expectations

Singapore two-dollar bills

OCBC upgraded SGX to Buy after fiscal third-quarter earnings beat expectations on “sharply better” derivatives revenue.

Third-quarter net profit of S$100.5 million, up 21.0 percent on-year, beat OCBC’s forecast after derivatives revenue rose 20.4 percent on-year to S$90.5 million, with the segment revenue topping S$90 million for the first time since fiscal 2016, the bank said.

“On the back of this, margins showed across the board improvements quarter-on-quarter and year-on-year,” it said in a note on Monday, with the operating margin at 53.0 percent, up from 50.0 percent in the previous quarter.

“Together with a strong set of third-quarter results, it is heartening to note that management is expecting market activity to improve. The group is also focusing on strengthening its partnerships and strategic alliances,” it said.

OCBC raised its full-year earnings forecast to S$371.9 million from S$364.1 million, pushing up its fair value estimate to S$8.22 from S$8.16.

“SGX is offering a total return of about 12.4 percent (including dividend yield of 3.7 percent),” based on Friday’s closing share price of S$7.56, the bank said.

The stock ended Monday up 1.85 percent at S$7.70.