a different beat
TRANSCRIPT
9.11
November 16, 2020
Fin
ancia
ls
Sin
gapore
THIS REPORT HAS BEEN PREPARED BY MAYBANK KIM ENG RESEARCH
SEE PAGE 38 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Co. Reg No: 198700034E MICA (P) : 099/03/2012
ESG Tear Sheet Insert
Thilan Wickramasinghe [email protected] (65) 6231 5840
Singapore Exchange Ltd (SGX SP)
A different beat
SGX is transforming. This offers opportunities
SGX has evolved from a cash-equities exchange to a pan-Asian, multi-
asset platform offering derivatives, fixed income and alternative
products. This positions it to benefit from multiple structural trends that
are driving demand for risk-management products. Its balance sheet has
the capacity to gear up offering significant dry-powder for accretive,
bolt-on acquisitions in growth segments. While SGX’s cash-equities
business is ex-growth, it enjoys high operating leverage and contributes
to dividend visibility. Its valuations are un-stretched (trading at mean
PE), while offering a highly visible 3.5% yield. Initiate BUY with target
price of SGD10.77 for 18% upside.
Right place, right time, right solutions?
SGX’s non-cash equities businesses contribute 62% of revenues (vs 38% in
FY12). We estimate this to rise to 74% by FY23E, underpinned by higher
volumes in its product suite of index, FX and commodity derivatives. This
is driven by rising demand for risk management as a result of increased
market volatility, stricter regulations, digitisation of OTC, expanding
passive investing and reconfiguration of supply chains. Deep liquidity in
its products and a strong execution track record should provide SGX with
a competitive advantage vs rivals regionally, we believe.
Cash equities: slow growth, cash cow
Delistings have outpaced IPOs by 40% since FY12. The lack of a hinterland
like China has kept market velocity a third below HK levels. However,
this segment offers strong operating leverage. We estimate that segment
revenues generated above a market ADV of SGD580m flows directly to
EBITDA. Singapore’s ADV has been 2x higher than this in the past 5 years.
Hence, we believe this segment – while seeing low growth - should
continue to be a key support for dividend visibility going forward.
Initiate with BUY and SGD10.77 TP. 18% upside
SGX has much lower total debt to equity than peers (24% vs 68%). Flexing
its balance sheet should give it significant headroom for complementary
bolt-on acquisitions. In the meantime, the Group is trading at a 21.7x
FY21E PE – its long term mean, while offering a highly visible dividend
yield due to its quarterly, absolute dividend policy. Upside risks exists for
a higher payout ratio going forward, we believe. Our blended multi-stage
DCF (WACC 7.2%, 1% terminal growth) and peer PE (27x target) TP offers
18% upside. Initiate with BUY.
Share Price SGD 9.11
12m Price Target SGD 10.77 (+18%)
BUY
Company Description
Statistics
52w high/low (SGD)
3m avg turnover (USDm)
Free float (%)
Issued shares (m)
Market capitalisation
Major shareholders:
23.3%
2.4%
2.0%
1,072
19.6
Singapore Exchange Ltd. operates a multi-asset
exchange including Singapore's sole equities trading
venue
Temasek Holdings Pte Ltd. (Investment Co
The Vanguard Group, Inc.
BlackRock Fund Advisors
10.39/8.00
74.2
SGD9.8B
USD7.2B
Price Performance
90
110
130
150
170
190
210
230
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20
SGX - (LHS, SGD) SGX / Straits Times Index - (RHS, %)
-1M -3M -12M
Absolute (%) (1) 5 3
Relative to index (%) (7) 0 23
Source: FactSet
FYE Jun (SGD m) FY19A FY20A FY21E FY22E FY23E
Revenue 910 1,053 1,004 1,094 1,174
EBITDA 524 656 574 605 638
Core net profit 391 472 452 478 506
Core FDEPS (cts) 36.4 43.9 42.1 44.4 47.1
Core FDEPS growth(%) 7.7 20.5 (4.2) 5.7 5.9
Net DPS (cts) 30.0 30.5 31.7 33.5 35.4
Core FD P/E (x) 21.7 19.0 21.7 20.5 19.4
P/BV (x) 7.8 7.2 7.7 7.0 6.4
Net dividend yield (%) 3.8 3.7 3.5 3.7 3.9
ROAE (%) 35.8 40.4 35.9 35.9 34.8
ROAA (%) 18.4 19.6 16.6 16.4 15.8
EV/EBITDA (x) 15.3 13.0 16.2 15.2 14.2
Net gearing (%) (incl perps) net cash net cash net cash net cash net cash
Consensus net profit - - 435 442 451
MKE vs. Consensus (%) - - 4.0 8.1 12.2
November 16, 2020 2
Singapore Exchange Ltd
Value Proposition
SGX operates Singapore’s only securities exchange and a
regional derivatives exchange. It also provides support
services and trading infrastructure.
While its beginnings are rooted as a cash-equities
exchange, the group is diversifying away to become a
multi-asset, risk management trading venue.
It has built deep liquidity pools and sizable market share
in key risk management derivative products, which gives it
a competitive advantage over regional exchanges.
SGX’s traditional cash-equities business is ex-growth and
losing market share to regional exchanges – particularly
North Asia. But this segment enjoys high operating
leverage, which provides better dividend visibility.
SGX’s revenue mix shifting towards derivatives
Source: Company
Price Drivers
Historical share price trend
Source: Company, Maybank Kim Eng
1. SGX announces proposals for dual-class listings and
broader single stock futures introduction
2. Rising concerns over the potential loss of India derivative
contract licensing due to on-shoring
3. Rising commodity prices – particularly iron ore – driving
expectations of higher FICC income
4. Strong delivery of 1Q20 PAT underpinned by rising
derivative income
5. Loss of MSCI licensing partnership to HKEX
Financial Metrics
Equity derivative volume increased at 5% CAGR in the past
5 years. We expect the pace to double to 10% CAGR FY21-
23E, supported by higher regional risk management
demand.
Cash-equity market velocity reached 37% amid COVID-19
liquidity in FY20. We expect this to trend towards
historical run rates of around 30% as conditions normalise.
Although opex was contained at +3% YoY in FY20, we
expect this to accelerate by 8% YoY in FY21E as tech
spending and staff costs normalise.
Opex set to accelerate in FY21E
Source: Company
Swing Factors
Upside
A sooner-than-expected COVID-19 macro recovery may
drive higher market volumes and liquidity.
Value-accretive M&A that may complement existing
business segments.
New licensing agreements for derivative products or
unique in-house index products can drive volume upside.
Downside
Disruption to SGX technology infrastructure leading to
halts in trading can have a material impact on earnings
as well as market confidence.
Cancellation or losses of derivative licensing agreements
can have a material volume and fee impact.
Advent of disruptive FinTechs and off-exchange trading
solutions.
[email protected] thilanw@maybank-
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
FICC Equities - Cash Equities - Derivatives DCI
80
90
100
110
120
130
140
150
160
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
Nov-15 Nov-16 Nov-17 Nov-18 Nov-19
SGX - (LHS, SGD) SGX / Straits Times Index - (RHS, %)
-5%
0%
5%
10%
15%
20%
25%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
1
1
2
3
5
4
November 16, 2020 3
Singapore Exchange Ltd
Business Model & Industry Issues
As Singapore’s sole securities exchange and as a self-regulatory organisation, SGX faces significant reputational and
regulation risks. Disruptions to operating its markets in a fair, orderly and transparent manner could have material social
and financial risks to market participants, the financial system and the general public
SGX’s heavy reliance on technology exposes it to risks on systems resiliency, cyber security and data protection. Increasing
electronification of markets are set to broaden these risks further
While the Group does disclose next-year targets and KPI on ESG metrics (especially on energy usage, HR etc.) there is
limited disclosures or commitments on time-bound, medium/long term sustainability goals
It has an almost even balance in gender diversity. However, notable pay gaps favouring males exists for middle management
SGX is rated AA by MSCI ESG Ratings and is included in several sustainability best practice related indices
Material E issues
SGX formulated and launched an Environmental Policy in
2016 which encapsulates direct and indirect impacts on
energy consumption
As a firm heavily reliant on technology, there is a
significant dependency on readily available energy.
Starting from FY20, SGX is using Renewable Energy
Certificates to offset electricity consumption in its offices
The Group’s primary datacentre has been awarded the
SS564 certification for Green Datacentres and its
secondary datacentre has a BCA Green mark Platinum
certification
Key G metrics and issues
As a self-regulatory organisation, SGX faces significant
regulation and reputation risks. While SGX’s RegCo is
segregated and governed as an independent
organisation, perceptions of balancing corporate
profitability with market integrity risks remain
As a business model heavily reliant on technology,
significant risks exist on service availability, capacity,
latency, cyber security and data protection. The Group
uses self-assessment benchmarked to history as well as
global peers to monitor operational resiliency. There
are data protection policies in place, while it deploys
machine learning to detect early signs of trouble in its
systems
SGX conducts an independent annual institutional
investor perception survey to receive feedback on
corporate strategy, management team, governance
etc. It also conducts regular public consultations for
feedback on rules changes
The Group has policies in place for Conduct & Ethics,
Staff Dealing, Regulatory Conflicts, Whistleblowing
Sustainability strategy and execution is conducted
through the Executive Management Committee (EMCO),
which includes the CEO. There is no disclosure on
Board level sustainability representation except for the
EMCO’s advisory role
73% of the Board are classified as Independent. Only
27% of directors are female. For mid-level employees,
a gender pay gap of around 2-8% exists favouring males
SGX reports under the GRI framework and is part of the
Bloomberg ESG Data Index, Bloomberg Gender-
Diversity Index, MSCI World ESG Leaders Index, iSTOXX
Global ESG Select 100 Index and iEdge SG ESG Leaders
Index
Material S issues
SGX’s primary social responsibility is to ensure the
participation in its markets are carried out in a fair,
orderly and transparent manner
Disruptions to its market or regulatory operations can have
material social risks to the financial community, retail
investors and the public at large
The Group needs to ensure operational resiliency. SGX
regularly conducts BCP and pandemic scenario testing
It is increasing financial inclusivity through stakeholder
education – particularly for retail investors by reaching out
through the SGX Academy
The Group has articulated clear FY21 targets social-
economic engagement. Longer term targets are not
disclosed
November 16, 2020 4
Singapore Exchange Ltd
Focus Charts
Fig 1: Derivatives materially increasing revenue share, while cash-equities should continue to decline
Source: Company data, Maybank Kim Eng
Fig 2:Significant MoM regional market volatility driven by COVID-19 and macro factors. Expect this to remain elevated
Source: Factset, Maybank Kim Eng
Fig 3: Monthly open interest to volumes show SGX has deep liquidity. This allows for better risk management solutions
Source: SGX, HKEX, Maybank Kim Eng
Fig 4:Cash-equities is ex-growth, but enjoys high operating leverage. This improves dividend visibility
Source: Company data, Maybank Kim Eng
Fig 5: SGX is trading just under mean PE 12-month fwd, which we believe is a decent entry point
Source: Bloomberg, Maybank Kim Eng
Fig 6: Lower than peers total debt to equity offers opportunities for gearing up and M&A catalysts
Source: Maybank Kim Eng
10% 10% 11% 14% 14% 13% 14% 15% 16% 19% 22% 24%
62% 60% 57% 50% 48% 49% 47% 37% 38% 32% 30% 26%
17% 20% 21% 26% 27% 26% 28% 37% 34%
35% 35% 36%
11% 10% 11% 10% 11% 12% 12% 11% 12% 14% 14% 14%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
FICC Equities - Cash Equities - Derivatives Data, Connectivity, Indices
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
KLCI STI HSE SET China-A JSE
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
SGX Futures HKEX Futures
-
200
400
600
800
1,000
1,200
1,400
FY18 FY19 FY20 FY21E FY22E FY23E
Average daily value ADV (SGDm) LHS
Flow directly
to EBITDA
16.0
18.0
20.0
22.0
24.0
26.0
28.0
(x)
+1SD = 24.0x
Mean = 21.9x
-1SD = 19.8x
-10%
10%
30%
50%
70%
90%
110%
130%
150%
Total Debt to Equity Average
November 16, 2020 5
Singapore Exchange Ltd
1. Right place, right time, right solutions?
Changing business mix
SGX operates Singapore’s securities exchange as well as a regional
derivatives exchange along with support services and infrastructure. It has
been evolving from a traditional cash-equities exchange to a broader,
multi-asset solution. The Group’s non-cash equities businesses contributed
62% of revenues in FY20 compared to just 38% in FY12.
Fig 7: SGX’s revenues by business segment (%)
* From 1Q FY20, SGX changed their revenue reporting segments to FICC, Equities and Data, Connectivity and Indices. MKE has restated historical revenue line items under these headings. These are based on company guidance together with estimates.
Source: Company data, Maybank Kim Eng
We estimate this to rise to 74% by FY23E, underpinned by higher volumes
in SGX’s product suite of index, FX and commodity derivatives. The
Group’s derivative market turnover growth has overtaken securities
market growth since FY14.
Fig 8: Securities vs. derivatives turnover (Indexed to FY12=100)
Source: Maybank Kim Eng
10% 10% 11% 14% 14% 13% 14% 15% 16% 19% 22% 24%
62% 60% 57% 50% 48% 49% 47% 37% 38% 33% 28% 26%
17% 20% 21% 26% 27% 26% 28%
37% 34% 34% 36% 36%
11% 10% 11% 10% 11% 12% 12% 11% 12% 13% 14% 14%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
FICC Equities - Cash Equities - Derivatives Data, Connectivity, Indices
0
50
100
150
200
250
300
350
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Securites Derivatives
November 16, 2020 6
Singapore Exchange Ltd
Indeed, derivative volumes in FY20 reached 3x higher than FY12 levels.
Contrastingly, securities volumes have remained flat to slightly below
those levels.
1.1 Structural drivers increasing demand for Risk
Management Solutions We believe risk-management-driven derivative volumes should continue to
see an upward trajectory, fuelled by several drivers. These include:
1. Rising market volatility
2. Stricter regulations
3. Digitisation of fixed income & OTC
4. More passive investing
5. Reconfiguration of supply chains
These factors should allow for complementary positioning of SGX’s
product offerings, in our view. The Group offers a wide array of solutions
and risk-management products.
Fig 9: SGX’s product suite Securities Fixed Income Derivatives Indices
Stocks
Retail Fixed Income Securities Equity Index Futures Equity Indices
REITS
Wholesale Fixed Income Securities Single Stock Futures Derivative Indices
Business Trusts
SGX Bond Pro - OTC Trading FX Futures & Options Fixed Income Indices
ETF
Dividend Index Futures Custom Indices
Leveraged & Inverse Products
Interest Rate Futures & Options Straits Times Indices
Daily Leverage Certificates
Iron Ore Futures & Options Third-party Indices
Structured Warrants
Freight Futures & Options Cryptocurrency Indices
ADRs
Rubber Futures & Options
Coal Futures & Options
Oil Futures & Swaps
Petrochemical Futures & Swaps
Electricity Futures
Source: Company data
1.1.1 Rising market volatility
Even prior to the COVID-19 pandemic, market volatility has been rising
rapidly in Asia.
This has been due to US-China trade war tensions, geopolitical uncertainty
in the South China Sea as well as massive levels of liquidity injections post
the Global Financial Crisis (GFC). Low interest rates have also been a
contributing factor.
The advent of COVID-19 and the resultant lockdowns and travel
restrictions have further increased uncertainty and lowered market
visibility.
This is being reflected in the markets regionally, with major indices across
Asia (as well as globally) displaying significant volatility YTD.
November 16, 2020 7
Singapore Exchange Ltd
Fig 10: Asia stock indices MoM performance YTD (%)
Source: Factset, Maybank Kim Eng
This volatility is unlikely to wane going forward with economic activity
expected to remain under pressure and individual country GDP recovery
trajectories taking widely different paths to normalisation.
Fig 11: Regional GDP growth expectations (%)
2017 2018 2019 2020F 2021F
Indonesia 5.1 5.2 5.0 -1.4 4.5
Malaysia 5.7 4.7 4.3 -5.4 5.1
Philippines 6.7 6.2 6.0 -6.5 4.5
Singapore 4.3 3.4 0.7 -5.7 4.0
Thailand 4.1 4.2 2.4 -7.2 5.0
Source: Factset, Maybank Kim Eng
Fig 12: VIX Index
Source: Factset, Maybank Kim Eng
As measure of global volatility, we see that the VIX has also been
indicating significant turbulence – particularly in 2020. But even if you
ignore 2020 as a whole, the past few years have also experienced
significant gyrations.
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
KLCI STI HSE SET China-A JSE
0
10
20
30
40
50
60
70
80
Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20
November 16, 2020 8
Singapore Exchange Ltd
1.1.2 Stricter Regulations
Following the GFC, there has been significant push towards increasing
transparency and stability of the financial system. International standard
setting bodies and regulators including the FSB, IOSCO, CPMI and BCBS
have been pushing for reforms to encourage centralise clearing and
improving information availability.
Specifically, regulations that are implementing Uncleared Margin Rules are
estimated to impact a significant portion of derivative trades from
September 2020. These rules will make trading bilateral FX options over-
the-counter (OTC) significantly more expensive, according to Greenwich
Associates. As a result, more of these trades should get pushed on to
exchanges and electronic trading.
Fig 13: Proportion of FX volumes traded electronically (2018)
Source: Greenwich Associates
Separately, the US SEC has amended its rules to enhance requirements for
more market disclosures and investor protection for OTC derivatives since
September 2020.
In 2019, Singapore’s MAS rolled out amendments to the mandatory OTC
derivative trading obligations. Starting from April 2020 this is encouraging
more trading to go into organised markets.
Increasingly, we believe regulators would continue to favour on-market
derivative trading as a means of ensuing better transparency and market
stability going forward.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Spot DeliverableForwards
Swaps Non-deliverableForwards
Options
November 16, 2020 9
Singapore Exchange Ltd
1.1.3 Digitisation of Fixed Income
The fixed-income market has been traditionally offline and conducted
over the counter. According to Vanguard, this is now changing driven by:
Increased regulations for transparency
Dealers reducing bond inventories due to new capital requirements
and reduction in resources
Increase in electronic and algo-driven trading
Higher participation of ETFs and target asset allocation funds
These factors are accelerating growth for on-market fixed income trading.
Fig 8 below shows the pace of growth in US investment grade bond trading
electronically vs. the total market (which is largely traditional trading).
Fig 14: US High Yield Bond Trading Growth YoY (%)
Measured by growth in average daily trading volume. Electronic growth proxy MarketAxcess US high grade trade volume data. Total market growth estimated from FINRA and TRACE reporting
Source: Vanguard, MarketAxess,Maybank Kim Eng
We believe these trends will expand globally, including Asia. This should
have a positive impact for fixed income listing and trading platforms such
as BondPro offered by SGX. Separately, in September 2020, SGX – together
with HSBC and Temasek - completed a digital bond issuance using digital
asset technology leveraging smart contracts and distributed ledgers. Issues
such as these should support acceleration of on-market, electronic bond
transactions further, in our view.
Separately, subsidies offered by the Monetary Authority of Singapore (MAS)
to encourage first time bond issuance in Singapore should be an additional
tailwind, we believe. According to its Singapore Corporate Debt Market
Development Report 2019, average annual first-time debt issuance
doubled in 2017-2019 vs 2014-2016 as a result of the Asian Bond Grant
scheme launched in 2017. The MAS’ Sustainable Bond Grant Scheme,
which supports ESG-linked debt issuances with subsidies for offsetting
external review costs, should also encourage more bond issuances in
Singapore, we believe. This scheme is set to run till May 2023.
0
5
10
15
20
25
30
2014 2015 2016 2017 2018 2019
Electronic Total market
November 16, 2020 10
Singapore Exchange Ltd
1.1.4 More Passive Investing
ETF assets under management are rising rapidly across Asia-Pacific,
according to PwC. Indeed, regionally there is an acceleration of innovative
ETF launches including products such as smart beta and factor investing.
Regional smart beta ETF AUM has tripled since 2013 (Fig 10).
Fig 15: Global ETF AUM
Source: Statista, Maybank Kim Eng
Fig 16: APAC Strategic Beta AUM
Source: PwC, Maybank Kim Eng
Additionally, there is increasing demand for sustainable investment driven
by increasing focus on environmental and climate risks. This should also
drive higher product innovation in the region, especially around ETFs.
Also rising climate risks are likely to increase market volatility going
forward, driving up demand for hedging products, in our view.
Fig 17: Global Principle of Responsible Investment (PRI) signatory AUM
Source: UNPRI, PwC, Maybank Kim Eng
SGX’s acquisition of Scientific Beta – an index development firm
established by EDHEC Risk Institute – should support it with a credible
pipeline of product offerings in this space over the medium term, we
believe.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000 USDbn
0
100
200
300
400
500
600
700
800
900
2013 2014 2015 2016 2017 2018 Jun-19
USDbn
0
10
20
30
40
50
60
70
80
90
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
USDtn
November 16, 2020 11
Singapore Exchange Ltd
1.1.5 Reconfiguration of supply chains
Uncertainty and unpredictability of US-China relations and disruptions
experienced due to COVID-19 should accelerate supply chain relocation
from North Asia to Southeast Asia, in our view.
Fig 18: Top-2 redirected investment destinations for MNCs in China
Source: AmCham Shanghai, Maybank Kim Eng
Fig 19: Chinese investments in US and ASEAN
Source: China Global Investment Tracker
As corporates adopt a China + 1 supply chain strategy (see Recovery &
Reconfiguration, 29 Nov 2019), Singapore should benefit given its role as
an AAA rated global financial centre and host to multiple regional MNC
HQs. This should drive up demand from corporate treasuries for risk-
management solutions, where SGX’s product suite is complementary, in
our view.
Deep liquidity in these products and a strong execution track record
should provide SGX with a competitive advantage vs rival offerings
regionally.
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00%
SE Asia
India
USA
2019 2018
0
10
20
30
40
50
60
2015 2016 2017 2018 2019
USDbn
USA SE Asia
November 16, 2020 12
Singapore Exchange Ltd
1.2 SGX is leveraged to benefit from growth drivers We believe SGX has built a comprehensive product suite that provides
investors with opportunities to manage risks as the operating environment
in Asian markets evolve.
By way of background, in May 2020, SGX discontinued its 23-year licensing
agreement with index provider MSCI. At the same time HKEX announced a
fresh partnership with MSCI to move its futures and option derivative
products to Hong Kong. This has resulted in SGX winding down its MSCI-
index linked futures contracts with a target of fully exiting by February
2021. The exception is the MSCI Singapore contract, which will remain
listed in Singapore.
In August 2020, SGX signed a strategic partnership with FTSE Russell and
has accelerated migration of its MSCI Index products to the new
partnership.
In our view, this background of major change and migrations offers a clear
opportunity to test SGX’s product resilience.
A critical success factor the Group has built up is to support deep liquidity
in its key product offerings. We believe that once a strong level of
liquidity is created within a trading venue, it is harder for a rival to come
in and take away market share – even if the pricing is competitive.
1.2.1 Deep product liquidity
An example of its deep liquidity competency is the SGX Taiwan Index
Futures Contract. SGX has been a primary trading venue for this contract.
In 3Q20, the MSCI version of the contract migrated to HKEX, while SGX
introduced the FTSE-Russell version. At the same time the MSCI Taiwan
contract also continued to trade on SGX during the quarter.
Fig 20: Taiwan Futures Contract Volumes by Product and Venue
Source: SGX, HKEX
We observe that despite being introduced at the same time, the FTSE-
Russell Taiwan Contract on SGX saw 10x higher volumes vs. the MSCI
Taiwan Contract in HKEX. Also the volumes of the MSCI Taiwan Contract
on SGX remained stable between 2Q20 and 3Q20 despite an identical
product being offered in Hong Kong.
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2Q20 3Q20
MSCI Taiwan - HKEX FTSE Taiwan - SGX MSCI Taiwan - SGX
Launched July 2020
November 16, 2020 13
Singapore Exchange Ltd
We believe this is a key example of the strength of SGX as a trading venue
and it is harder for competitive pressure to erode share simply by offering
an identical product elsewhere without the visibility on liquidity.
1.2.2 Strong product market share
SGX has also been able to create strong market share in key products. This
in turn supports deeper liquidity. This provides a critical stickiness from
competitive products from other trading venues – even if they are larger
markets.
Examples of this include SGX’s CNH USD FX Futures Contract as well as the
USD INR FX Futures Contract. In both these cases, similar contracts are
listed in larger trading venues such as HKEX and CME. Nevertheless, SGX
has been able to preserve and grow its market share.
Fig 21: CNH USD FX Futures Contract Volumes
Source: CME, HKEX, SGX
Fig 22: USD INR FX Futures Contract Volumes
Source: CME, HKEX, SGX
Separately, the Group has built a strong domain in commodity derivatives
including the steel supply chain and rubber. Structural growth in affluence
in Asia, rising urbanisation together with Singapore’s commodity hub
status, complements SGX’s product offering. We believe this provides a
significant strategic advantage to SGX over other regional exchanges.
Fig 23: SGX derivative product volume growth YoY (%)
Source: Company data, Maybank Kim Eng
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9M19 9M20
CME HKEX SGX
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
9M19 9M20
CME HKEX SGX
-10%
0%
10%
20%
30%
40%
50%
60%
FY19 FY20 FY21E FY22E FY23E
Currency futures Iron Ore derivatives Rubber futures Freight derivatives Equity Derivatives
November 16, 2020 14
Singapore Exchange Ltd
According to management, SGX is deepening its product suite in derivative
products to include more currencies, commodities and equities. An
example of this is Single Stock Futures (SSFs). SGX offers a selection of SSF
that cover Singapore and Indian stocks. In June 2020, it launched 10 SSF
covering some of the larger market cap components of the MSCI Singapore
Free Index. Off a low base, SSF volumes saw a 180% YoY increase in FY20
and we estimate continued strong growth in this segment as SGX
introduces new SSFs as well as growing liquidity for its existing offerings.
Overall, we estimate SGX’s existing derivative contracts to expand at 11%
CAGR between FY20-23E. The introduction of new contracts - especially as
SGX leverages its FTSE-Russell partnership - can drive growth to surprise
on the upside, in our view.
This should be a key driver in keeping overall liquidity for derivatives at
healthy levels. Monthly derivative open interest to total contracts
averaged 30% since December 2015.
Fig 24: Monthly derivative open interest to total contracts
Source: SGX, Maybank Kim Eng
SGX’s deeper derivative liquidity offering becomes clearer when looking at
monthly derivative open interest to total volumes by product type
compared to HKEX – the primary competitor financial centre for Singapore.
Fig 25: Monthly futures open interest to volumes YTD
Source: SGX, HKEX, Maybank Kim Eng
Fig 26: Monthly options open interest to volumes YTD
Source: SGX, HKEX, Maybank Kim Eng
In both product groups, SGX has consistently displayed significantly higher
liquidity, we observe.
15%
20%
25%
30%
35%
40%
Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
SGX Futures HKEX Futures
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
SGX Options HKEX Options
November 16, 2020 15
Singapore Exchange Ltd
1.2.3 Fixed Income Centre
SGX has seen strong growth in volumes as a Fixed Income listing centre.
Singapore is a wealth and fund management hub with total assets under
management of SGD4 trillion in 2019, according to the MAS. This has been
increasing at a CAGR of 11% in the past 5 years.
Fig 27: SGX new bond listings
Source: Maybank Kim Eng
With a broad level of liquidity, we believe Singapore should continue to
benefit as a bond listing destination. In YTD 2020, 90% of total bonds
listed were from overseas origins. Additionally, as we discussed earlier, an
accelerating shift to exchanges for bond trading and listing globally should
further strengthen SGX’s advantages here, in our view.
Fig 28:FX breakdown of bond issuances 2018
Source: MAS
Separately, Singapore’s position as a Global FX centre, further strengthens
its attractiveness as a bond listing destination. SGX’s wide FX futures and
options product suite complements this offering investors hedging
opportunities.
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
160%
0
500
1,000
1,500
2,000
2,500
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
New bond listings New bond listings YoY (%)
SGD USD GBP EUR AUD HKD RMB Others
November 16, 2020 16
Singapore Exchange Ltd
1.2.4 Cross Asset Margining enhances cost-saving appeal
Cross Margining allows for the netting of margins across correlated
derivative products. This allows for margining cost savings for market
participants and also facilitates them to hold more exposure for a given
quantum of margins.
Fig 29: SGX Cross Asset Margining Example
Product USD CNH FX
Futures Nikkei 225
Index Futures Total Margin
Exposure USD 100,000 100,000 Margin Requirement 1.4% 4.1% Outright Margin (A) 1,400 4,100 5,500
Cross-Product Margin Offset (B) 31% 31% Margin Requirement after deducting offset
(A) x [100%-(B)] (C) 966 2,829 3,795
Margin Savings vs. Outright Margin (A) - (C) 434 1,271 1,705
* Based on SGX Margin Schedule 03 Feb 2020
Source: SGX, Maybank Kim Eng
Many exchanges offer this facility. However, given SGX’s wide product
suite, this allows for broader cross-margin applications to market
participants. This should in turn support better liquidity across products,
in our view.
November 16, 2020 17
Singapore Exchange Ltd
1.2.5 Monetising data and connectivity
Increasing use of technology in trading and rising share of high-frequency,
algorithmic trading is driving client demand for better connectivity to
SGX’s IT infrastructure. SGX monetises this by offering trading system
connections, network linkages and data-centre co-locations for market
participants. Increasing derivatives connectivity subscriptions should be a
key driver for growth here going forward given more derivative product
listings and rising liquidity in this segment.
Additionally, SGX also supplies pricing data, company announcements and
financial indices, which are also monetised.
In the financial indices segment, the Group provides independent index
calculation services as well as its own proprietary indices. These include
the ‘iEdge’ branded indexes on segments such as S-REITS, Sustainability,
APAC Dividend REITS etc. Additionally, the Group’s purchase of Scientific
Beta in February 2020 should give it access to proprietary ‘smart-beta’
indexes. SB was established in 2012 by the EDHEC-Risk Institute Asia. From
2010-2019, its assets under replication has increased 10x.
As we discuss in Section 1.1, ‘smart-beta’ products should see significant
demand going forward and SGX’s positioning with Scientific Beta should
allow it to be a credible player within this field.
Fig 30: SGX Market Data and Connectivity Revenues
Source: Maybank Kim Eng
Segment revenues for Market Data and Connectivity have increased by 8%
CAGR in the past 10 years. We estimate this pace will accelerate to 11%
CAGR FY20-23E as increased revenue support from Scientific Beta product
monetisation along with more derivative connectivity takes place.
Particularly for index product commercialisation, we believe the revenue
risks are on the upside.
-5%
0%
5%
10%
15%
20%
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Market Data and connectivity (SGD) LHS YoY (%) RHS
November 16, 2020 18
Singapore Exchange Ltd
2. Cash Equities: Slow growth, cash cow
Over the past 10 years, SGX’s cash-equities revenues have contracted at a
1% CAGR. FY20 delivered the highest revenue since FY13, driven by a
COVID-19 trading boost largely due to higher retail participation. This is
likely the exception rather than the rule, we believe. Indeed, FY19
segment revenues were the lowest in our records since FY08.
Fig 31: SGX Cash Equities Revenue by Segment
Source: Company data, Maybank Kim Eng
We expect segment contributions to continue to contract going forward.
This could primarily be driven by limited hinterlands available to SGX to
keep cash equity momentum supported, as well as limited sectors offering
attractive listing valuations. Nevertheless, the cash-equities segment has
strong operating leverage offering continued dividend visibility.
2.1 Limited Hinterlands Unlike some of SGX’s regional rivals such as Malaysia and Thailand – SGX
has a very small domestic institutional or retail trading base. Also, it has
no large liquid neighbourhood linkage - like HKEX’s bridge to Mainland
China.
Fig 32: Bura Malaysia equities trading by investor type (Sep-20)
Source: Bursa Malaysia
Fig 33: SET equities trading by investor type 2019
Source: SET
0
50
100
150
200
250
300
350
400
450
500
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
SGDm
Listing Corporate Actions & others
Trading & clearing Securities settlement & depository management
Treasury & other
Local Institutional & Nominees Local Retial & Other Foreign Local Investors Local Institutions Prop Trading Foreign
November 16, 2020 19
Singapore Exchange Ltd
Indeed, in Malaysia nearly half of trading volumes are driven by local
institutions, while local retail investors account for nearly 40%. In
Thailand, local institutional and retail investors account for nearly 50% of
trading volumes.
Fig 34: DBU share financing growth YoY (%)
Source: MAS, Maybank Kim Eng
As a global financial centre, funds domiciled in Singapore invest globally.
Therefore, SGX does not have much of a domestic support baseline. SGX
does not publicly disclose equities trading volume by investor type, but we
see that consumer lending for SGD share financing by the banking system
has been losing steam (Fig 28). This implies that overall retail
participation is structurally weakening in Singapore, in our view.
As a result, we believe market velocity in Singapore has been capped
compared to other regional markets – especially HKEX.
Fig 35:Average 3-year market velocity
Source: Bloomberg, Maybank Kim Eng
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Thailand Hong Kong Singapore Malaysia Indonesia
November 16, 2020 20
Singapore Exchange Ltd
2.2 Limited niche sector valuations Historically, SGX has only a handful of unique sectors that offer materially
better equity valuations and liquidity. Examples include S-REITS,
Semiconductor Manufacturing, Healthcare and some Consumer names.
Especially in the current environment, with the exception of S-REITs, we
believe it is hard to argue that SGX has strong niche market dominance in
any of the other sectors.
This is different from its suite of derivative products where SGX has
several key offerings with deep liquidity and market share.
In the past, it has tried to introduce focused sectors – such as S-Chips,
Offshore & Marine, and Palm Oil - but the track record has been mixed.
Contrastingly, Hong Kong and China have successfully leveraged their deep
domestic liquidity to offer clearer niche sectors than SGX, we believe.
Similarly, many of the regional exchanges have also leveraged their core-
domestic industry sectors – such as Palm Oil in Malaysia or Consumer in
Thailand – to offer differentiation.
As a result, over the long term, we believe SGX’s competitive advantages
as a listings destination may erode viz-a-viz North Asia and specialised
sectors in regional exchanges.
Indeed, since FY12, de-listings have outpaced new listings by 40%. We
believe this trend is unlikely to reverse going forward.
Fig 36: SGX and Catalist: Total listings and de-listings
Source: SGX, Maybank Kim Eng
-50
-40
-30
-20
-10
0
10
20
30
40
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Total listings Total delistings
November 16, 2020 21
Singapore Exchange Ltd
2.3 Range-bound ADV Given the limited headroom for listings, overall market velocity and value
traded are likely to remain capped, in our view. Over the past 10 years,
SGX’s average daily value traded (ADV) has averaged SGD1.2b with a
standard deviation to mean of around 12%.
Fig 37: SGX ADV and velocity
Source: SGX, Maybank Kim Eng
According to management, SGX’s retail contribution to ADV is typically
20%. Such a low proportion further dampens liquidity and by extension
keeps overall ADV in a narrow range.
2.4 But a little can be a lot The structural disadvantages we discuss in earlier sections means that
SGX’s cash equities business is ex-growth, in our view
Fig 38: Estimate of Cash-Equities Direct Opex Share SGDm FY20 Comments
SGX Total Opex (A) 397 Staff Costs 215
Technology 69 Processing & royalties 54 Premises 10 Professional fees 13 Others 36 Estimated Cost Allocation - Cash Equities (%) (B)
Staff Costs 50% Assumed half with the rest split between Derivative,
FICC, Data
Technology 60% Larger share of tech to support transaction volumes,
speed
Processing & royalties 10% Limited royalties. Mostly royalties are allocated to
Derivatives Premises 30% Assumed to be split evenly across segments
Professional fees 30% Assumed to be driven largely by derivative/index
business Others 40%
Direct Opex for Cash Equities (A) x (B) 176 Percentage of total cash-equities revenue as a proportion of market ADV 30% Based on historical run-rates
ADV needed to cover direct Cash-Equities Opex (SGDm) 580 5-year average ADV (SGDm) 1,166 Difference (%) -50%
Source: SGX, Maybank Kim Eng
However, when placed in the context of BCG’s Growth Share Matrix, we
believe that this business segment displays the characteristics of a ‘Cash
20%
25%
30%
35%
40%
45%
-
200
400
600
800
1,000
1,200
1,400
1,600
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Average daily value ADV (SGDm) LHS Average market velocity (%) RHS
November 16, 2020 22
Singapore Exchange Ltd
Cow’. It is low growth, but commands high market share – given it has a
monopoly as the sole equities trading venue in Singapore.
As one of the largest markets by capitalisation in ASEAN, the cash-equities
segment enjoys scale as well. This positioning is unlikely to be challenged
in the medium term, given limited policy discussions on liberalising and
introducing new trading venues in Singapore.
Fig 39: SGX ADV vs. minimum required to cover Opex
Source: SGX, Maybank Kim Eng
Within this backdrop, we believe the cash equities segment should benefit
significantly from high operating leverage. SGX does not disclose direct
operating costs by segment. We have derived this based on a set of
assumptions detailed in Fig 38.
From this we see that SGX requires an ADV of around SGD580m to ensure
direct opex is covered. All ADV above that flows directly to EBITDA. Over
the past 5 years, SGX ADV has averaged SGD1.2b – 102% above this
minimum.
Over the next three forecasts years, we conservatively estimate ADVs to
average SGD1b annually – levels last seen in FY19 – with market velocity
falling to 30% from the COVID-19 trading driven 37% in FY20. The risks
here are on the upside, especially following the US presidential election
victory by Democrat Joe Biden – which is strategically expected to favour
Asian risk assets.
As a result, we believe the cash equities segment should continue to
benefit from strong operating leverage despite being in an ex-growth
phase. This should provide significant support for SGX’s dividend visibility
going forward.
-
200
400
600
800
1,000
1,200
1,400
FY18 FY19 FY20 FY21E FY22E FY23E
Average daily value ADV (SGDm) LHS Minimum ADV needed to cover direct opex
Flow directly to
November 16, 2020 23
Singapore Exchange Ltd
2.5 ADV does not drive share price Historically, there has been a tendency to link SGX’s share price
performance to ADV. The argument being that lower the ADV, lower the
earnings and therefore, weaker the share price. Our analysis shows no
significant correlation exits between SGX’s share price performance and
ADV across long or short timeframes.
Fig 40: Correlation between SGX share price and market ADV
Source: Maybank Kim Eng
Given the narrowing contribution by cash-equities to overall earnings, we
believe a correlation is unlikely to develop going forward either.
Separately, given the low participation of retail, there is very little
correlation between market volumes and interest rates. This is unlike
North Asian markets such as China where retail participation accounts for
70% of volumes across national exchanges. According to SCMP, China
added 6.4m new retail accounts in the first 5 months of 2020 – more than
the population of Singapore.
Fig 41: SGX ADV vs SIBOR
Source: Company data, Factset, Maybank Kim Eng
As a result, we believe despite the current low interest rate environment
outlook, it is unlikely to translate in to ADV upside for SGX.
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
10-years 8-years 5-years 3-years
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
2.00%
-
200
400
600
800
1,000
1,200
1,400
1,600
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E
Average daily value ADV (SGDm) LHS Average SIBOR (%) RHS
November 16, 2020 24
Singapore Exchange Ltd
Given the market is weighted more towards market makers (around 10% of
ADV) and liquidity providers and institutional investors (more than 60%
ADV), we believe clearing fees effectively will be tight going forward.
Since FY12, fees have been coming off by around 1.1% annually.
Conservatively, we assume clearing fees to continue to see downward
pressure as the market mix continues to tilt towards market makers,
liquidity providers and algo-trading.
Fig 42: SGX Cash Equities Clearing Fees
Source: Company data, Maybank Kim Eng
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
5.80
6.00
6.20
6.40
6.60
6.80
7.00
7.20
7.40
7.60
7.80
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Effective Trading & clearing fee (bps) LHS YoY (%) RHS
November 16, 2020 25
Singapore Exchange Ltd
3. Initiate BUY with TP of SGD10.77
3.1 Unchallenging valuations SGX is trading at a 12-month forward PE of 21.7x. This is at its long-term
average. While SGX has been listed since 2000, we define long-term from
the period starting from 2012. This is to reflect the broader
internationalisation of the Group and its diversification in to derivatives
etc. ramping up and reaching a level of maturity. The decade prior to this,
SGX’s primary strategic direction was as a cash-equities exchange. This
measure also excludes the volatility during the GFC.
Fig 43: SGX 12-mnth forward PE (x)
Source: Maybank Kim Eng
From a 12-month forward PB perspective too, it is trading at almost at its
long-term mean.
Fig 44: SGX 12-month forward PB (x)
Source: Maybank Kim Eng
We believe these valuations offer a decent entry point to the stock.
Historically, SGX has been viewed as a dividend-yield play. Here the stock
is offering a 3.5% FY21E dividend yield. Given its absolute dividend
payment policy, SGX offers superior dividend visibility amongst yield
stocks, we believe.
16.0
18.0
20.0
22.0
24.0
26.0
28.0
(x)
+1SD = 24.0x
Mean = 21.9x
-1SD = 19.8x
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
(x)
Mean = 7.7x
-1SD = 7.1x
+1SD = 8.4x
November 16, 2020 26
Singapore Exchange Ltd
Fig 45: SGX 12-month fwd dividend yield (%)
Source: Bloomberg, Maybank Kim Eng
SGX’s latest policy pays out a DPS of SGD0.08 quarterly. As a result, we
estimate a DPS of SGD0.32 for FY21E. However, we believe the risks are
on the upside.
Fig 46: SGX DPS and dividend payout ratio
Source: Company data, Maybank Kim Eng
With the exception of FY20, SGX’s dividend payout ratio has consistently
been above 85% in the past decade. In FY20, earnings grew 21% YoY – the
highest in a decade. This was underpinned by a strong growth in cash-
equity volumes (+26% YoY ADV YoY) driven by liquidity and QE measures.
However, overall COVID-19 bearish macro concerns seem to have kept the
dividend payout ratio at a conservative 69%. As a result, going in to FY21-
23E, we have conservatively assumed only a 75% payout ratio.
3.0
3.5
4.0
4.5
5.0
(%)
+1SD = 4.1%
Mean = 3.8%
-1SD = 3.6%
60%
65%
70%
75%
80%
85%
90%
95%
100%
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
DPS (SGD) LHS Payout Ratio (%) RHS
November 16, 2020 27
Singapore Exchange Ltd
3.2 Potential value accretion from bolt-on acquisitions Prior to the GFC, SGX engaged in a few minority acquisitions. However,
starting with the purchase of the Baltic Exchange in London in FY17, the
Group has increased its pace of acquisitions and investments to support its
multi-asset growth strategy. A few notable additions are highlighted
below:
Fig 47: SGX’s recent bolt-on acquisitions
Source: Company data
We expect these investments to enable SGX to enhance the value
proposition in its business segments.
Fig 48: Total debt-to-equity ratios of listed exchanges
* end-2019
Source: Factset, Maybank Kim Eng
We believe SGX has a significant runway to add more growth through
acquisitions. Prior to FY20 it had a net cash balance sheet. SGX added
some short-term debt in FY20 to fund its purchase of Scientific Beta that
-10%
10%
30%
50%
70%
90%
110%
130%
150%
Total Debt to Equity
November 16, 2020 28
Singapore Exchange Ltd
has taken its total debt-to-equity ratio to 24%. This still makes SGX as one
of the lowest geared exchanges amongst peers.
Average peer total debt to equity is 67.5% with a general bias towards
higher debt levels by exchanges weighted towards derivatives trading. In a
scenario where SGX gears up to peer average levels, we estimate the
Group should have an incremental SGD539m available for acquisitions and
investments.
While it is too soon to assess the returns profile of SGX’s recent
investments, we believe they have been executed on plan to leverage on
the mega trends we discuss in Section 1. We think as businesses emerge
from the pandemic, there may be attractive opportunities to invest at
reasonable valuations.
3.3 Blended DCF and Peer PE Target Price We value SGX on a blended target price methodology. We use multi-stage
DCF (WACC of 7.2%, 1% terminal growth) to capture SGX’s long-term value
creation. We give this a 70% weighting to signify the execution of its
multi-asset strategy. We give the remaining 30% to a peer PE basket (at
27x). We use this as a proxy to discount near-term market volatility and
liquidity.
Fig 49: Blended TP methodology Blended Target Price SGD Weighting
Mulit-stage DCF (WACC 7.2%, 1% terminal) 10.50 70%
Peer basket driven TP (27x PE target) 11.40 30%
Blended TP 10.77
PE at TP (2021E) 25.5
PB at TP (2021E) 9.0
Source: Maybank Kim Eng
3.4 Multi-stage DCF WACC assumptions
Fig 50: WACC Assumptions WACC
Risk Free rate 2.5%
Expected market risk premium 6.5%
Beta 0.85
COE 8.0%
Long term cost of debt 5.0%
Long term debt:equity 20%
FY20E Tax rate 17%
WACC 7.2%
Terminal growth 1.0%
Source: Maybank Kim Eng
November 16, 2020 29
Singapore Exchange Ltd
Detailed DCF
Fig 51: Detailed DCF
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
FY21E FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E FY32E FY33E FY34E FY35E Term
Profit before Tax 547 578 612 615 643 530 560 592 626 644 675 708 736 758 780 PBT growth YoY (%) -4% 6% 6% 0% 5% -18% 6% 6% 6% 3% 5% 5% 4% 3% 3% Operating Cashflow 487 523 552 549 577 610 644 680 719 740 776 814 846 871 897 Changes to working
capital (2) 4 4 2 4 4 4 4 4 4 4 4 4 4 4 Capex (40) (40) (40) (40) (40) (40) (40) (40) (40) (20) (20) (20) (20) (20) (20) Free cash flow to firm 445 487 516 511 541 573 608 644 683 724 760 798 830 855 880 14,093
Mid-cycle growth -23% 10% 6% -1% 6% 6% 6% 6% 6% 6% 5% 5% 4% 3% 3% 1%
PV 445 454 449 414 409 404 399 395 390 386 377 370 358 344 331 4,935
Enterprise value 10,859 Net debt (excluding
cash in clearning funds) (382)
Fair value 11,242 Weighted avg. shares
outstanding 1,070 Fair value per share
(SGD) 10.50
Source: Maybank Kim Eng
Peer PE Basket
Fig 52: Peer PE valuation (x) Stock Ticker Price Mkt Cap 12-mnth PE
(LCY) (SGDm) (x)
ASX ASX AU 81.17 15,876 32.4
TMX X CN 125.40 6,557 21.4
Deutsche Boerse DB1 GY 129.00 38,802 20.2
HKEX 388 HK 380.60 54,922 43.6
Bursa Malaysia BURSA MK 8.60 1,619 20.0
Euronext ENX FP 87.35 7,650 18.6
LSE LSE LN 82.62 48,211 39.0
Nasdaq NDAQ US 127.13 23,776 21.1
CME CME US 168.71 96,481 25.0
Japan Exchange 8697 JT 2,491 13,460 28.6
Average
27.0
Source: Factset, Maybank Kim Eng
November 16, 2020 30
Singapore Exchange Ltd
4. Detailed Financials
4.1 Detailed Profit & Loss
Fig 53: Detailed P&L
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Operating Revenue 712 685 779 818 801 845 910 1,053 1,004 1,094 1,174 Fixed income, Currencies & Commodities 73 77 107 114 107 118 139 171 196 236 280 Equities (Cash) 427 388 388 393 391 393 335 399 322 328 308 Equities (Derivatives) 139 144 203 224 209 235 333 360 349 379 421 Data, Connectivity & Indices 73 77 81 87 93 98 103 122 137 151 166 Operating Expenses (258) (268) (320) (350) (343) (361) (386) (397) (430) (489) (536) Staff Costs (123) (127) (150) (159) (162) (176) (191) (215) (224) (248) (271) Technology (64) (62) (65) (76) (76) (77) (79) (69) (72) (78) (86) Processing & royalties (29) (28) (47) (58) (45) (46) (47) (54) (73) (98) (112) Premises (15) (19) (17) (18) (19) (20) (20) (10) (10) (10) (10) Professional fees (11) (13) (13) (11) (10) (13) (15) (13) (14) (14) (15) Others (17) (20) (28) (28) (31) (30) (34) (36) (38) (40) (42) EBITDA 454 417 458 468 458 483 524 656 574 605 638 Depreciation (40) (45) (56) (59) (56) (59) (63) (90) (33) (34) (35) EBIT 414 372 402 409 402 425 461 566 541 571 603 Other gains/losses (10) 5 8 6 6 11 13 7 8 10 11 Associates and JVs 4 2 2 1 1 1 (2) (2) (2) (2) (2) Profit before tax 408 379 412 416 409 437 473 571 547 578 612 Tax (72) (59) (63) (67) (69) (74) (82) (99) (95) (100) (106) Net profit after tax 336 320 349 349 340 363 391 472 452 478 506 Non-controlling interests - - - - - - - (0) (0) (0) (0) Attributable NPAT 336 320 349 349 340 363 391 472 452 478 506
* From 1Q FY20, SGX changed their revenue reporting segments to FICC, Equities and Data, Connectivity and Indices. MKE has restated historical revenue line items under these headings. These are based on company guidance together with estimates.
Source: Company data, Maybank Kim Eng
November 16, 2020 31
Singapore Exchange Ltd
4.2 Detailed Balance Sheet
Fig 54: Detailed Balance Sheet
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Assets Current assets 1,580 1,389 1,504 1,799 1,613 1,680 1,577 1,716 1,854 2,137 2,421
Cash and cash equivalents 763 757 850 866 796 832 667 907 1,081 1,298 1,524 Cash as per statement of cashflows 613 607 633 598 520 550 446 686 860 1,078 1,303 Cash in clearning funds 150 150 217 268 276 282 221 221 221 221 221 Trade and other receivables 757 572 654 930 815 827 885 758 723 788 846 Financial assets, at FVOCI - - - - - - 25 48 48 48 48 Others 60 60 0 3 1 22 0 2 2 2 2 Non-current assets 215 252 298 307 429 435 555 963 915 921 926 Financial assets, at FVOCI - - - - - - 59 119 119 119 119 Investment property - - - - 26 26 25 24 24 24 24 Property, plant and equipment 24 61 61 62 80 72 61 51 68 71 73 Software 112 112 140 155 159 174 182 168 103 106 109 Right-of-use assets - - - - - - - 87 87 87 87 Intangible assets - - 26 26 64 61 58 108 108 108 108 Goodwill - - 10 10 88 89 85 329 329 329 329 Investments in associated companies 27 27 9 9 10 9 79 72 72 72 72 Others 51 51 51 45 0 4 7 4 4 4 4 Total assets 1,794 1,641 1,802 2,105 2,041 2,115 2,132 2,679 2,770 3,058 3,346 Liabilities
Current liabilities 884 699 805 1,098 973 986 1,001 1,258 1,320 1,489 1,651 Trade and other payables 783 616 718 1,013 892 891 912 809 771 840 902 Borrowings - - - - - - - 304 404 504 604 Lease liabilities - - - - - - - 19 19 19 19 Taxation 92 75 77 75 71 82 77 110 110 110 110 Provisions 7 8 9 10 10 11 12 14 14 14 14 Others 1 - 0 0 0 2 1 2 2 2 2 Non-current liabilities 22 20 21 18 35 33 40 172 172 172 172 Financial liability - - - - - - - 41 41 41 41 Lease liabilities - - - - - - - 70 70 70 70 Deferred tax liabilities 22 20 21 18 35 33 40 62 62 62 62 Net assets 889 922 976 990 1,033 1,096 1,091 1,249 1,277 1,396 1,523 Equity
Share capital 426 428 429 426 428 429 429 430 430 430 430 Treasury shares (20) (14) (12) (13) (13) (11) (13) (21) (21) (21) (21) Reserves 241 246 249 216 218 237 164 180 94 94 94 Retained profits 241 262 311 360 399 441 511 656 769 889 1,015 Non-controlling interests - - - - - - - 4 4 4 4 Total equity 889 922 976 990 1,033 1,096 1,091 1,249 1,277 1,396 1,523
Source: Company data, Maybank Kim Eng
November 16, 2020 32
Singapore Exchange Ltd
4.3 Detailed Cash Flow
Fig 55: Detailed Cash Flow
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Profit before Tax 408 379 412 416 409 437 473 571 547 578 612
Adjustments: (+) Depreciation 40 45 56 59 56 59 63 90 33 34 35
(+) Variable share-based payment 9 11 14 8 9 11 10 15 12 13 14 (-) Share of results from JVs & Associates (4) (2) (2) (1) (1) (1) 2 2 2 2 2
(-) Net interest income 10 (5) (8) (6) (6) (11) (13) (7) (8) (10) (11)
(-) Tax (64) (72) (59) (63) (67) (69) (74) (82) (99) (95) (100)
(+) Others - - - - - - - - - - -
Operating Cashflow 400 356 413 413 399 425 459 588 487 523 552
(+) Changes in working capital - - - - - - - - - - - (increase)/decrease in cash committed to NEMS - - (7) (1) (8) (6) 11 2 - - - Decrease/(increase) in receivables and other assets 23 184 (81) (276) 115 (12) (59) 127 35 (65) (58)
(Decrease)/increase in payables (13) (168) 110 295 (113) 5 10 (105) (37) 69 62
(-) Capex (28) (72) (82) (74) (60) (78) (47) (35) (40) (40) (40)
FCFF 382 301 352 357 334 335 374 578 445 487 516
(+) Net interest income (10) 5 8 6 6 11 13 7 8 10 11 (+) Increase from bank borrowings - - - - - - - 304 100 100 100
(-) Dividends (289) (300) (300) (332) (300) (300) (401) (321) (339) (358) (379)
Other adjustments (19) (13) (35) (65) (117) (17) (90) (327) (41) (21) (22)
Net increase in cash/cash equivalents 65 (6) 26 (35) (78) 29 (104) 241 173 218 226
Cash at the beginning of the year 548 613 607 633 598 520 550 446 686 860 1,078
Cash at the end of the year 613 607 633 598 520 550 446 686 860 1,078 1,303
Source: Company data, Maybank Kim Eng
4.4 MKE vs. Consensus
Fig 56: MKE vs. Consensus
FY21E FY22E FY23E
Total Revenue MKE 1,004 1,094 1,174
Street 1,047 1,075 1,122
Difference (%) -4% 2% 5%
Total PAT MKE 452 478 506
Street 435 442 451
Difference (%) 4% 8% 12%
Source: Factset, Maybank Kim Eng
November 16, 2020 33
Singapore Exchange Ltd
4.5 Key assumptions
Fig 57: Key assumptions
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
FICC Fixed income
Revenue from Bond Listing -10% 22% 9% -10% 6% 5% -11% 2% 48% 25% 25% Corporate Actions & Other Revenues 10% 6% 17% 0% -4% 0% -3% 0% -2% 8% 8% Currencies & Commodities
(Derivatives) Trading & clearing 27% 4% 50% 8% -9% 8% 7% 27% 21% 21% 18%
Treasury and Other 17% 2% 20% 17% -2% 24% 62% 22% -5% 21% 18%
Contract Volumes YoY (%) 10% 83% 273% 157% 24% 24% 32% 24% 22% 22% 19%
Equities Equities (Cash) Listing Total listing 25 27 23 18 18 18 16 13 20 20 20
Total delistings 21 35 21 23 29 25 24 39 29 31 31 Total revenue from listing YoY (%) -10% 22% 9% -10% 6% 5% -11% -4% 4% -4% -4% Corporate Actions & others revenue YoY (%) 10% 6% 17% 0% -4% 0% -1% -6% 1% -4% -4%
Trading & clearing Average daily value ADV
(SGDm) 1,461 1,136 1,093 1,097 1,118 1,256 1,042 1,318 1,017 1,069 1,009 Average market velocity (ADV/Avg. Mkt Cap) 41% 29% 27% 29% 29% 31% 26% 37% 30% 30% 28% Settlement & depository management YoY (%) 3% 1% 10% 13% -2% -14% -14% 30% -31% 3% -7% Treasury & other revenue YoY (%) 154% -12% 0% 10% 4% 4% -6% 2% 1% 1% 1%
Equities (Derivatives) Trading and clearning
revenues Equity Derivative Volumes
YoY (%) 34% 0% 50% 6% -14% 19% 19% -3% 10% 8% 11% Average fee per contract - YoY (%) -6% 4% 0% 1% 6% -10% 10% 6% 0% 0% 0% Treasury, license & other YoY (%) 17%
Data, Connectivity & Indices Market data & indices YoY
(%) -6% 7% 4% 5% 4% 6% 2% 38% 20% 15% 15%
Connectivity YoY (%) 3% 3% 7% 9% 10% 5% 6% 5% 5% 5% 5% Operating Expense Assumptions
Staff Costs 16% 3% 19% 6% 2% 8% 9% 12% 4% 11% 9%
Technology YoY (%) -3% -3% 6% 16% 0% 1% 3% -13% 5% 8% 10% Processing & royalties (% of derivatives) 20% 19% 21% 24% 21% 20% 16% 17% 20% 24% 24%
Tax (%) 18% 15% 15% 16% 17% 17% 17% 17% 17% 17% 17%
Total debt to equity 0% 0% 0% 0% 0% 0% 0% 24% 32% 36% 40%
Payout ratio (%) 89% 93% 86% 86% 88% 88% 82% 69% 75% 75% 75%
Source: Company data, Maybank Kim Eng
November 16, 2020 34
Singapore Exchange Ltd
5. Scenario Analysis
5.1 FY21E EPS sensitivity to YoY Equity derivative volume
growth
Fig 58: Equity derivative growth scenarios Equity Derivatives YoY growth FY21E EPS (SGD) % Change
-5% 0.39 -7%
0% 0.40 -5%
5% 0.41 -2%
10% 0.42 0%
15% 0.43 2%
20% 0.44 5%
Source: Maybank Kim Eng
5.2 FY21E EPS sensitivity to YoY FX & Commodity derivative
volume growth
Fig 59: FX & Commodity derivative growth scenarios FX & Commods Derivatives YoY growth FY21E EPS (SGD) % Change
-10% 0.39 -7%
0% 0.40 -5%
10% 0.41 -3%
22% 0.42 0%
25% 0.43 1%
35% 0.43 3%
Source: Maybank Kim Eng
5.3 FY21E EPS sensitivity to ADV
Fig 60: Average Daily Turnover scenarios
FY21E ADV Change from base
(SGDm) FY21E EPS (SGD) % Change
-10% 916 0.40 -4%
-5% 967 0.41 -2%
0% 1017 0.42 0%
5% 1068 0.43 2%
15% 1170 0.45 6%
25% 1272 0.47 11%
30% 1323 0.48 13%
40% 1424 0.49 17%
Source: Maybank Kim Eng
5.4 FY21E dividend yield sensitivity to payout ratio
Fig 61: Dividend payout sensitivity scenarios Payout Ratio (%) FY21E DPS (SGD) Yield (%)
60% 0.25 2.8%
70% 0.30 3.2%
75% 0.32 3.5%
80% 0.34 3.7%
85% 0.36 3.9%
90% 0.38 4.2%
Source: Maybank Kim Eng
November 16, 2020 35
Singapore Exchange Ltd
FYE 30 Jun FY19A FY20A FY21E FY22E FY23E
Key Metrics
P/E (reported) (x) 20.2 19.8 21.6 20.4 19.3
Core P/E (x) 21.7 18.9 21.6 20.4 19.3
Core FD P/E (x) 21.7 19.0 21.7 20.5 19.4
P/BV (x) 7.8 7.2 7.7 7.0 6.4
P/NTA (x) 4.3 4.0 4.2 3.7 3.4
Net dividend yield (%) 3.8 3.7 3.5 3.7 3.9
FCF yield (%) 4.4 6.5 4.6 5.0 5.3
EV/EBITDA (x) 15.3 13.0 16.2 15.2 14.2
EV/EBIT (x) 17.4 15.1 17.2 16.1 15.0
INCOME STATEMENT (SGD m)
Revenue 909.8 1,052.7 1,003.9 1,093.7 1,174.3
Gross profit 909.8 1,052.7 1,003.9 1,093.7 1,174.3
EBITDA 523.5 655.7 573.9 604.8 638.5
Depreciation 0.0 0.0 0.0 0.0 0.0
Amortisation 0.0 0.0 0.0 0.0 0.0
EBIT 461.0 565.8 541.2 570.6 603.1
Net interest income /(exp) 13.5 7.5 8.4 9.8 11.4
Associates & JV (1.5) (2.3) (2.3) (2.3) (2.3)
Exceptionals 0.0 0.0 0.0 0.0 0.0
Other pretax income 0.0 0.0 0.0 0.0 0.0
Pretax profit 473.0 570.9 547.2 578.1 612.2
Income tax (81.9) (99.0) (94.9) (100.2) (106.1)
Minorities 0.0 (0.2) (0.2) (0.2) (0.2)
Discontinued operations 0.0 0.0 0.0 0.0 0.0
Reported net profit 391.1 471.8 452.2 477.8 505.9
Core net profit 391.1 471.8 452.2 477.8 505.9
BALANCE SHEET (SGD m)
Cash & Short Term Investments 445.5 686.4 859.6 1,077.6 1,303.2
Accounts receivable 885.5 758.3 723.2 787.8 845.9
Inventory 0.0 0.0 0.0 0.0 0.0
Reinsurance assets 0.0 0.0 0.0 0.0 0.0
Property, Plant & Equip (net) 243.0 219.0 171.0 176.8 181.4
Intangible assets 142.9 437.5 437.5 437.5 437.5
Investment in Associates & JVs 79.1 72.0 72.0 72.0 72.0
Other assets 336.4 506.3 506.3 506.3 506.3
Total assets 2,132.3 2,679.5 2,769.6 3,058.0 3,346.4
ST interest bearing debt 0.0 304.1 404.1 504.1 604.1
Accounts payable 911.5 808.7 771.2 840.2 902.1
Insurance contract liabilities 0.0 0.0 0.0 0.0 0.0
LT interest bearing debt 0.0 0.0 0.0 0.0 0.0
Other liabilities 130.0 317.0 317.0 317.0 317.0
Total Liabilities 1,041.4 1,430.2 1,492.7 1,661.7 1,823.6
Shareholders Equity 1,090.8 1,244.8 1,272.4 1,391.8 1,518.3
Minority Interest 0.0 4.4 4.4 4.4 4.4
Total shareholder equity 1,090.8 1,249.3 1,276.8 1,396.3 1,522.7
Total liabilities and equity 2,132.3 2,679.5 2,769.6 3,058.0 3,346.4
CASH FLOW (SGD m)
Pretax profit 473.0 570.9 547.2 578.1 612.2
Depreciation & amortisation 62.5 89.9 32.7 34.2 35.4
Adj net interest (income)/exp 0.0 0.0 0.0 0.0 0.0
Change in working capital (37.8) 24.3 (2.3) 4.3 3.9
Cash taxes paid 0.0 0.0 0.0 0.0 0.0
Other operating cash flow (76.1) (72.5) (93.0) (89.2) (95.2)
Cash flow from operations 421.6 612.7 484.7 527.4 556.2
Capex (47.3) (34.6) (40.0) (40.0) (40.0)
Free cash flow 374.3 578.0 444.7 487.4 516.2
Dividends paid (401.4) (321.2) (339.2) (358.3) (379.4)
Equity raised / (purchased) 0.0 0.0 0.0 0.0 0.0
Change in Debt 0.0 304.1 100.0 100.0 100.0
Other invest/financing cash flow (76.9) (320.0) (32.3) (11.1) (11.1)
Effect of exch rate changes 0.0 0.0 0.0 0.0 0.0
Net cash flow (104.1) 240.9 173.2 217.9 225.7
November 16, 2020 36
Singapore Exchange Ltd
FYE 30 Jun FY19A FY20A FY21E FY22E FY23E
Key Ratios
Growth ratios (%)
Revenue growth 7.7 15.7 (4.6) 8.9 7.4
EBITDA growth 8.3 25.2 (12.5) 5.4 5.6
EBIT growth 8.5 22.7 (4.4) 5.4 5.7
Pretax growth 8.1 20.7 (4.2) 5.6 5.9
Reported net profit growth 7.7 20.6 (4.2) 5.7 5.9
Core net profit growth 7.7 20.6 (4.2) 5.7 5.9
Profitability ratios (%)
EBITDA margin 57.5 62.3 57.2 55.3 54.4
EBIT margin 50.7 53.7 53.9 52.2 51.4
Pretax profit margin 52.0 54.2 54.5 52.9 52.1
Payout ratio 82.1 69.2 75.0 75.0 75.0
DuPont analysis
Net profit margin (%) 43.0 44.8 45.0 43.7 43.1
Revenue/Assets (x) 0.4 0.4 0.4 0.4 0.4
Assets/Equity (x) 2.0 2.2 2.2 2.2 2.2
ROAE (%) 35.8 40.4 35.9 35.9 34.8
ROAA (%) 18.4 19.6 16.6 16.4 15.8
Liquidity & Efficiency
Cash conversion cycle nm nm nm nm nm
Days receivable outstanding 338.8 281.1 265.6 248.7 250.4
Days inventory outstanding nm nm nm nm nm
Days payables outstanding nm nm nm nm nm
Dividend cover (x) 1.2 1.4 1.3 1.3 1.3
Current ratio (x) 1.6 1.4 1.4 1.4 1.5
Leverage & Expense Analysis
Asset/Liability (x) 2.0 1.9 1.9 1.8 1.8
Net gearing (%) (incl perps) net cash net cash net cash net cash net cash
Net gearing (%) (excl. perps) net cash net cash net cash net cash net cash
Net interest cover (x) na na na na na
Debt/EBITDA (x) 0.0 0.5 0.7 0.8 0.9
Capex/revenue (%) 5.2 3.3 4.0 3.7 3.4
Net debt/ (net cash) (445.5) (382.4) (455.5) (573.5) (699.2)
Source: Company; Maybank
November 16, 2020 37
Singapore Exchange Ltd
Research Offices
ECONOMICS
Suhaimi ILIAS Chief Economist Malaysia | Philippines | Global (603) 2297 8682 [email protected]
CHUA Hak Bin Regional Thematic Macroeconomist (65) 6231 5830 [email protected]
LEE Ju Ye Singapore | Thailand (65) 6231 5844 [email protected]
Linda LIU Singapore | Vietnam (65) 6231 5847 [email protected]
Dr Zamros DZULKAFLI (603) 2082 6818 [email protected]
Ramesh LANKANATHAN (603) 2297 8685 [email protected]
William POH (603) 2297 8683 [email protected]
FX
Saktiandi SUPAAT Head of FX Research (65) 6320 1379 [email protected]
Christopher WONG (65) 6320 1347 [email protected]
TAN Yanxi (65) 6320 1378 [email protected]
Fiona LIM (65) 6320 1374 [email protected]
STRATEGY
Anand PATHMAKANTHAN
ASEAN (603) 2297 8783 [email protected]
FIXED INCOME
Winson PHOON, ACA (65) 6812 8807 [email protected]
SE THO Mun Yi (603) 2074 7606 [email protected]
REGIONAL EQUITIES
Anand PATHMAKANTHAN Head of Regional Equity Research (603) 2297 8783 [email protected]
WONG Chew Hann, CA Head of ASEAN Equity Research (603) 2297 8686 [email protected]
ONG Seng Yeow Research, Technology & Innovation (65) 6231 5839 [email protected]
MALAYSIA
Anand PATHMAKANTHAN Head of Research (603) 2297 8783 [email protected] • Strategy
Desmond CH’NG, BFP, FCA (603) 2297 8680 [email protected] • Banking & Finance
LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas Services- Regional • Automotive
ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional
YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media • Aviation
TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos
WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property
LEE Yen Ling (603) 2297 8691 [email protected] • Glove • Ports • Shipping • Healthcare • Petrochemicals
Kevin WONG (603) 2082 6824 [email protected] • REITs • Technology
Jade TAM (603) 2297 8687 [email protected] • Consumer Staples & Discretionary
TEE Sze Chiah Head of Retail Research (603) 2082 6858 [email protected]
Nik Ihsan RAJA ABDULLAH, MSTA, CFTe (603) 2297 8694 [email protected] • Chartist
Amirah AZMI (603) 2082 8769 [email protected] • Retail Research
SINGAPORE
Thilan WICKRAMASINGHE Head of Research (65) 6231 5840 [email protected] • Banking & Finance - Regional • Consumer
CHUA Su Tye (65) 6231 5842 [email protected] • REITs - Regional
LAI Gene Lih, CFA (65) 6231 5832 [email protected] • Technology • Healthcare
Kareen CHAN (65) 6231 5926 [email protected] • Transport
TAN Chin Poh Head of Retail Research (65) 6231 5928 [email protected]
Eric ONG (65) 6231 5924 [email protected] • Retail Research
Matthew SHIM (65) 6231 5929 [email protected] • Retail Research
INDIA
Jigar SHAH Head of Research (91) 22 4223 2632 [email protected] • Strategy • Oil & Gas • Automobile • Cement
Neerav DALAL (91) 22 4223 2606 [email protected] • Software Technology • Telcos
Kshitiz PRASAD (91) 22 4223 2607 [email protected] • Banks
Vikram RAMALINGAM (91) 22 4223 2607 [email protected] • Automobile • Media
INDONESIA
Isnaputra ISKANDAR Head of Research (62) 21 8066 8680 [email protected] • Strategy • Metals & Mining • Cement • Autos • Consumer • Utility
Rahmi MARINA (62) 21 8066 8689 [email protected] • Banking & Finance
Aurellia SETIABUDI (62) 21 8066 8691 [email protected] • Property
Willy GOUTAMA (62) 21 8066 8500 [email protected]
• Consumer
PHILIPPINES
Jacqui De JESUS (63) 2 8849 8844 [email protected] • Strategy • Conglomerates
Romel LIBO-ON (63) 2 8849 8844 [email protected] • Property
Fredrick De GUZMAN (63) 2 8849 8847 [email protected] • Consumer
Bernadine B BAUTISTA (63) 2 8849 8847 [email protected] • Utilities
Rachelleen RODRIGUEZ (63) 2 8849 8843 [email protected] • Banking & Finance
THAILAND
Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Strategy • Consumer • Materials • Services
Jesada TECHAHUSDIN, CFA (66) 2658 6300 ext 1395 [email protected] • Banking & Finance
Kaushal LADHA, CFA (66) 2658 6300 ext 1392 [email protected] • Oil & Gas – Regional • Petrochemicals - Regional
Vanida GEISLER, CPA (66) 2658 6300 ext 1394 [email protected] • Property
Yuwanee PROMMAPORN (66) 2658 6300 ext 1393 Yuwanee.P @maybank-ke.co.th • Services
Ekachai TARAPORNTIP Head of Retail Research (66) 2658 5000 ext 1530 [email protected]
Surachai PRAMUALCHAROENKIT (66) 2658 5000 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel
Suttatip PEERASUB (66) 2658 5000 ext 1430 [email protected] • Food & Beverage • Commerce
Jaroonpan WATTANAWONG (66) 2658 5000 ext 1404 [email protected] • Transportation • Small cap
Thanatphat SUKSRICHAVALIT (66) 2658 5000 ext 1401 [email protected] • Media • Electronics
Wijit ARAYAPISIT (66) 2658 5000 ext 1450 [email protected] • Strategist
Theerasate PROMPONG (66) 2658 5000 ext 1400 [email protected] • Equity Portfolio Strategist
Apiwat TAVESIRIVATE (66) 2658 5000 ext 1310 [email protected] • Chartist and TFEX
VIETNAM
Quan Trong Thanh (84 28) 44 555 888 ext 8184
[email protected] • Banks
Hoang Huy, CFA (84 28) 44 555 888 ext 8181 [email protected] • Strategy
Le Nguyen Nhat Chuyen (84 28) 44 555 888 ext 8082 [email protected] • Oil & Gas
Nguyen Thi Sony Tra Mi (84 28) 44 555 888 ext 8084 [email protected] • Consumer
Tyler Manh Dung Nguyen (84 28) 44 555 888 ext 8180 [email protected] • Utilities • Property
Nguyen Thi Ngan Tuyen Head of Retail Research (84 28) 44 555 888 ext 8081 [email protected] • Food & Beverage • Oil & Gas • Banking
Nguyen Thanh Lam (84 28) 44 555 888 ext 8086 [email protected] • Technical Analysis
November 16, 2020 38
Singapore Exchange Ltd
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to s ell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ fr om fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies d iscussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives” ) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solic it business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report to the extent permitted by law.
This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categor ies of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this repor t.
Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.
Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of Maybank Kim Eng Securities (Thailand) Public Company Limited. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) accepts no liability whatsoever for the actions of third parties in this respect.
Due to different characteristics, objectives and strategies of institutional and retail investors, the research products of MBKET Institutional and Retail Research departments may differ in either recommendation or target price, or both. MBKET reserves the rights to disseminate MBKET Retail Research reports to institutional investors who have requested to receive it. If you are an authorised recipient, you hereby tacitly acknowledge that the research reports from MBKET Retail Research are first pr oduced in Thai and there is a time lag in the release of the translated English version.
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. MBKET does not confirm nor certify the accuracy of such survey result.
The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the Securities and Exchange Commission. Thaipat Institute made this asse ssment based on the information received from the listed company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company. The assessment result is therefore made from the perspective o f Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, MBKET does not confirm, verify, or certify the accuracy and completeness of the assessment result.
US This third-party research report is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). A ll responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security mentioned within must do so with: Maybank Kim Eng Securities USA Inc. 400 Park Avenue, 11th Floor, New York, New York 10022, 1-(212) 688-8886 and not with, the issuer of this report.
November 16, 2020 39
Singapore Exchange Ltd
Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to he rein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Singapore: As of 16 November 2020, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report. Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: As of 16 November 2020, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report. India: As of 16 November 2020, and at the end of the month immediately preceding the date of publication of the research report, KESI, authoring analyst o r their associate / relative does not hold any financial interest or any actual or beneficial ownership in any shares or having any conflict of interest in the subject companies except as otherwise disclosed in the research report.
In the past twelve months KESI and authoring analyst or their associate did not receive any compensation or other benefits fr om the subject companies or third party in connection with the research report on any account what so ever except as otherwise disclosed in the research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.
OTHERS
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Conduct Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility fo r its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that f or accurate guidance recipients should consult with their own independent tax advisers.
DISCLOSURES
Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938- H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This report is distributed in Singapore by Maybank KERPL (Co. Reg No 198700034E) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Maybank Kim Eng Securities (“PTMKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the Financial Services Authority (Indonesia). Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities Limited (License Number: 117/GP-UBCK) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited and the Bombay Stock Exchange and is regulated by Securities and Exchange Board of India (“SEBI”) (Reg. No. INZ000010538). KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) and as Research Analyst (Reg No: INH000000057) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Conduct Authority.
November 16, 2020 40
Singapore Exchange Ltd
Historical recommendations and target price: Singapore Exchange Ltd (SGX SP)
Definition of Ratings
Maybank Kim Eng Research uses the following rating system
BUY Return is expected to be above 10% in the next 12 months (including dividends)
HOLD Return is expected to be between 0% to 10% in the next 12 months (including dividends)
SELL Return is expected to be below 0% in the next 12 months (including dividends)
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.
7.0
7.7
8.4
9.1
9.8
10.5
May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20
Singapore Exchange Ltd
13 May Buy : SGD8.8
November 16, 2020 41
Singapore Exchange Ltd
Malaysia Maybank Investment Bank Berhad
(A Participating Organisation of
Bursa Malaysia Securities Berhad)
33rd Floor, Menara Maybank,
100 Jalan Tun Perak,
50050 Kuala Lumpur
Tel: (603) 2059 1888;
Fax: (603) 2078 4194
Singapore Maybank Kim Eng Securities Pte Ltd
Maybank Kim Eng Research Pte Ltd
50 North Canal Road
Singapore 059304
Tel: (65) 6336 9090
London Maybank Kim Eng Securities
(London) Ltd
PNB House
77 Queen Victoria Street
London EC4V 4AY, UK
Tel: (44) 20 7332 0221
Fax: (44) 20 7332 0302
New York Maybank Kim Eng Securities USA
Inc
400 Park Avenue, 11th Floor
New York, New York 10022,
U.S.A.
Tel: (212) 688 8886
Fax: (212) 688 3500
Stockbroking Business:
Level 8, Tower C, Dataran Maybank,
No.1, Jalan Maarof
59000 Kuala Lumpur
Tel: (603) 2297 8888
Fax: (603) 2282 5136
Hong Kong Kim Eng Securities (HK) Ltd
28/F, Lee Garden Three,
1 Sunning Road, Causeway Bay,
Hong Kong
Tel: (852) 2268 0800
Fax: (852) 2877 0104
Indonesia PT Maybank Kim Eng Securities
Sentral Senayan III, 22nd Floor
Jl. Asia Afrika No. 8
Gelora Bung Karno, Senayan
Jakarta 10270, Indonesia
Tel: (62) 21 2557 1188
Fax: (62) 21 2557 1189
India Kim Eng Securities India Pvt Ltd
1101, 11th floor, A Wing, Kanakia
Wall Street, Chakala, Andheri -
Kurla Road, Andheri East,
Mumbai City - 400 093, India
Tel: (91) 22 6623 2600
Fax: (91) 22 6623 2604
Philippines Maybank ATR Kim Eng Securities Inc.
17/F, Tower One & Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City, Philippines 1200
Tel: (63) 2 8849 8888
Fax: (63) 2 8848 5738
Thailand Maybank Kim Eng Securities
(Thailand) Public Company Limited
999/9 The Offices at Central World,
20th - 21st Floor,
Rama 1 Road Pathumwan,
Bangkok 10330, Thailand
Tel: (66) 2 658 6817 (sales)
Tel: (66) 2 658 6801 (research)
Vietnam Maybank Kim Eng Securities Limited
4A-15+16 Floor Vincom Center Dong
Khoi, 72 Le Thanh Ton St. District 1
Ho Chi Minh City, Vietnam
Tel : (84) 844 555 888
Fax : (84) 8 38 271 030
Saudi Arabia In association with
Anfaal Capital
Ground Floor, KANOO Building
No.1 - Al-Faisaliyah,Madina Road,
P.O.Box 126575 Jeddah 21352
Kingdom of Saudi Arabia
Tel: (966) 920023423
South Asia Sales Trading Kevin Foy
Regional Head Sales Trading
Tel: (65) 6636-3620
US Toll Free: 1-866-406-7447
North Asia Sales Trading Andrew Lee
Tel: (852) 2268 0283
US Toll Free: 1 877 837 7635
Indonesia Iwan Atmadjaja [email protected] (62) 21 8066 8555
London Greg Smith [email protected] Tel: (44) 207-332-0221
New York James Lynch [email protected] Tel: (212) 688 8886
India Sanjay Makhija [email protected] Tel: (91)-22-6623-2629
Philippines Keith Roy [email protected] Tel: (63) 2 848-5288
www.maybank-ke.com | www.maybank-keresearch.com