Singapore Exchange upgraded to Add by CGS-CIMB

Ticker at Singapore Exchange (SGX)Ticker at Singapore Exchange (SGX)

CGS-CIMB upgraded Singapore Exchange to Add from Hold, saying the exchange is “thriving” amid volatile market conditions, with derivatives volumes climbing.

“We expect demand for FX and iron ore hedging (underpinned by price volatility) to remain strong. Treasury income also grew on higher margin requirements and open interest. We think the current low interest rate environment and rise of green financing could attract more bond listings,” the brokerage said in a note Friday.

CGS-CIMB added the exchange’s fiscal first-quarter earnings beat its forecast, coming in at 29 percent of its full-year forecast

Singapore Exchange reported Thursday its fiscal first quarter net profit climbed 25 percent on-year to S$114 million as revenue increased across all four major business segments.

The brokerage raised its target price on the shares to S$9.00 from S$8.10 after increasing is fiscal 2020-2022 earnings per share forecasts by 5.8 percent to 7.2 percent on the forecast-beating fiscal first quarter results, and stronger derivatives volumes and average contract fees.

“We like SGX for its multi-asset strategy, relatively defensive growth outlook, strong balance sheet (zero debt) and dividend yield of 3-4 percent,” the note said.

CGS-CIMB added that the exchange’s recent establishment of a S$1.5 billion multicurrency debt issuance program could signal possible acquisitions ahead.

Shares of SGX were up 7.13 percent at S$8.87 at 3:33 P.M. SGT.

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