Singapore Exchange downgraded by Maybank KE on lack of catalysts

SGX signage at the Shenton Way building; taken October 2018.SGX signage at the Shenton Way building.

Maybank Kim Eng downgraded Singapore Exchange to Hold from Buy, saying it “had a good run” after a strong stock performance, but near-term catalysts were limited.

“The group’s new initiatives, particularly in derivatives and FX, show promising growth, but these may take time to shine through the current integration process, where operating expense (opex) is set to increase significantly,” the brokerage said in a note Friday.

Maybank KE forecast opex would increase at a 13 percent compound annual growth rate over fiscal 2022-2024, compared with 6 percent over the previous three years.

Singapore Exchange reported Thursday its fiscal full year net profit fell 6 percent on-year to S$445 million as expenses increased and treasury income declined amid a low interest rate environment.

Maybank KE said the results missed Street forecasts on weaker equity segment revenue, and the trend may persist as market velocity is losing steam after performing strongly since the start of the pandemic.

A 45 percent drop in full year treasury income due to lower interest rates could persist in the near term, the note said.

The brokerage lowered its fiscal year 2022 and 2023 profit after tax forecasts by 6-7 percent, although it increased its fiscal 2024-25 profit after tax estimates by 9-10 percent.

The target price was raised to S$12.27 from S$11.48.

Shares of SGX dropped 3.0 percent to S$10.99 by 2:11 p.m. SGT Friday. The stock started the year around S$9.70.