DBS Vickers has downgraded Singapore Exchange to “hold” from “buy” and lowering its target price by 10 cents to $7.70 as the brokerage continues to see challenges persisting in the Securities market, as well as the Derivatives business.
SGX reported 3Q16 revenue was 3% on-year higher at $205.8 million while net profit was up 1% to $89 million. 9M16 revenue of $620.1 million and net profit of $272.2 million accounted for 71% of DBS’s full-year estimates.
Improved market activities boosted Securities revenue while derivatives hit by lower contract values. Securities accounted for 27% of total revenue in 3Q16 (24% in 2Q16), vs 40% for Derivatives (40% in 2Q16).
In a Thursday report, lead analyst Ling Lee Keng says derivatives will continue to be the main growth driver until SGX is able to monetise initiatives put forth to improve the Securities market microstructure.
“Key priorities include: (1) increase liquidity of the securities market; (2) diversify its business mix; and (3) maintain cost discipline. We believe the results of these priorities would only be visible over the medium to long term,” says Ling.
DBS has also tweaked its earnings forecast for FY16F/17F/18F down by 7%/4%/3%, after adjusting for lower derivatives contract value.
“Our TP is accordingly reduced to S$7.70, from S$7.80, based on the dividend discount model, which implies 24x FY16F EPS. Dividend yield is decent at 3.7% for FY16F.”
As 9.25am, SGX is down 2.61% at $7.81.
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SGX reported 3Q16 revenue was 3% on-year higher at $205.8 million while net profit was up 1% to $89 million. 9M16 revenue of $620.1 million and net profit of $272.2 million accounted for 71% of DBS’s full-year estimates.
Improved market activities boosted Securities revenue while derivatives hit by lower contract values. Securities accounted for 27% of total revenue in 3Q16 (24% in 2Q16), vs 40% for Derivatives (40% in 2Q16).
In a Thursday report, lead analyst Ling Lee Keng says derivatives will continue to be the main growth driver until SGX is able to monetise initiatives put forth to improve the Securities market microstructure.
“Key priorities include: (1) increase liquidity of the securities market; (2) diversify its business mix; and (3) maintain cost discipline. We believe the results of these priorities would only be visible over the medium to long term,” says Ling.
DBS has also tweaked its earnings forecast for FY16F/17F/18F down by 7%/4%/3%, after adjusting for lower derivatives contract value.
“Our TP is accordingly reduced to S$7.70, from S$7.80, based on the dividend discount model, which implies 24x FY16F EPS. Dividend yield is decent at 3.7% for FY16F.”
As 9.25am, SGX is down 2.61% at $7.81.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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