Brokers Predict Increased Investor Interest and Liquidity for Singapore Exchange
The Singapore Exchange (SGX) is poised to benefit from a stronger overall market valuation, driven by the listing of tech and new economy companies through Special Purpose Acquisition Companies (SPACs), according to CGS-CIMB. These blank-cheque companies, designed to acquire and take private firms public, are expected to attract greater investor interest and improve trading liquidity, providing a much-needed boost to the SGX, which has seen a slowdown in listings over recent years.
CGS-CIMB has raised its rating for SGX from “hold” to “add” while maintaining a target price of S$10.40, based on 25 times its 2022 earnings estimates. The brokerage noted that SGX’s share price has fallen by around 16% since the release of its full-year results in August, presenting an appealing entry point for investors.
In contrast, RHB has lowered its target price for SGX to S$10.30 from S$11.10, reflecting higher near-term operating costs and lower-than-expected trading volumes. RHB has kept a “neutral” stance on SGX.
According to CGS-CIMB, the relatively short listing timelines for SPACs could attract more companies to list, which would likely drive up trading volumes on SGX. Furthermore, SGX’s SPAC listing requirements, which are closely aligned with those in the United States but less strict than those of Hong Kong, are seen as advantageous in positioning SGX as a multi-product exchange in the region, particularly against its competitor, the Hong Kong Exchange.
While SPAC listings may not contribute significantly to SGX’s equity listing revenues, which accounted for just 3% of total revenue in FY2021, they will help bridge the gap left by the expiration of SGX’s licensing agreement with MSCI earlier this year. SPACs are also expected to support deep-tech startups by providing them access to long-term capital, a key element of Singapore’s national agenda to foster research, innovation, and enterprise.
RHB analyst Shekhar Jaiswal acknowledged the potential for higher near-term expenses from SGX’s recent acquisitions but remains optimistic about its long-term prospects. Despite trimming its FY2022 earnings forecast by 4%, RHB has raised its earnings estimates for FY2023 and FY2024 by 5% each, citing a more positive outlook for SGX’s growth trajectory.
