Singapore Exchange (SGX) is poised to see a strong 1QFY11 based on recent positive data points. For the Securities Market, daily average value rose 16% MoM in Jul and 10% in Aug to S$1.5b. In addition, overall derivatives trading volume (futures and options) grew 19% YoY and 11% MoM to 5.3m contracts.
Of some of its recent initiatives and announcements, we are particularly excited by the announcement in Aug to enhance the listing, trading and distribution of fixed income products.
This includes getting more Singapore-listed companies to issue bonds for listing and trading on SGX, extending to preference shares and convertible bonds.
With the new base dividend commitment of 16 cents, and our projected payout of 90%, net yield is decent at 3.9%.
However, at current price, it is trading exactly at our fair value estimate of S$7.93, and we are maintaining our HOLD rating. We will turn buyers of the stock at S$7.50 or lower.
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