Asian Wealth And Digital Transformation Will Expand Markets

Key Takeaways

• Product innovation, digital transformation, and expanding regional offerings position SGX for accelerated top-line growth, recurring revenues, and margin expansion well above analyst expectations.
  
• SGX's leadership in ESG and capturing rising Asian wealth flows strengthens its long-term prospects for high-quality, diversified, and resilient fee-based income.
  
• Long-term growth is threatened by global competition, limited market diversification, and disruptive fintech trends despite ongoing efforts to expand products and revenue streams.

Catalysts

An investment holding, engages in the operation of integrated securities and derivatives exchange, related clearing houses, and an electricity market in Singapore.

• Analyst consensus expects OTC FX and derivatives growth to continue, but this may be significantly understated as the record surge in adoption, product innovation (such as FX swaps), and integration of new market participants is fueling exponential growth in volumes and a rising EBITDA contribution, which is likely to accelerate top-line growth and boost group EBITDA margins beyond current forecasts.
  
• While analysts broadly see upside in cash equity and REIT flows, they underestimate the long-term impact of SGX's aggressive expansion of product offerings-especially regionally-focused ETFs, depository receipts, and leveraging new retail distribution channels-which can drive sustained double-digit revenue growth and significant increases in securities trading volumes.
  
• SGX is uniquely positioned to benefit from the structural rise in Asian household and institutional wealth, capturing flows from a rapidly expanding investor base seeking asset diversification, which will deliver compounding increases in listings, product demand, and fee-based revenue over the coming decade.
  
• The accelerating digital transformation of Asian capital markets combined with SGX's pro-active investments in trading technology, platform innovation, and new digital asset classes (including tokenized securities and AI-powered data services) will create high-margin, recurring revenue streams, materially lifting long-term earnings growth and net margins.
  
• As ESG adoption deepens globally, SGX's first-mover position in sustainable finance, green bond offerings, and specialized ESG-linked indices will make it the leading gateway for ESG capital in Asia, unlocking premium fee opportunities and growing its proportion of high-quality, recurring revenues.

Singapore Exchange Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Singapore Exchange compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Singapore Exchange's revenue will grow by 8.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 49.7% today to 45.6% in 3 years time.
• The bullish analysts expect earnings to reach SGD 765.5 million (and earnings per share of SGD 0.71) by about July 2028, up from SGD 656.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 31.1x on those 2028 earnings, up from 25.7x today. This future PE is greater than the current PE for the SG Capital Markets industry at 15.3x.
• Analysts expect the number of shares outstanding to grow by 0.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.11%, as per the Simply Wall St company report.

Singapore Exchange Future Earnings Per Share Growth

Risks

• The company's IPO pipeline, while showing improved momentum, remains highly susceptible to overall global listing headwinds and persistent issuer preference for larger markets like Hong Kong and New York, which may restrict long-term listing revenue and constrain sustainable growth.
  
• Regional trading volumes at SGX are driven by short-term interest in select segments such as REITs and derivatives, but secular trends point to global capital flows increasingly concentrating in US and Chinese exchanges, which could undermine SGX's long-term liquidity and erode revenue generation.
  
• SGX's revenue growth relies heavily on continued expansion of its derivatives and OTC FX franchises, yet this exposes the company to global volatility cycles and fee compression as international exchanges intensify competition, risking persistent margin pressure and volatile earnings.
  
• Despite efforts to broaden the multi-asset product suite, SGX has not meaningfully addressed the threat from decentralized finance and blockchain alternatives, which may gradually disintermediate traditional exchanges and diminish SGX's relevance, undermining both transaction volumes and fee income.
  
• With Singapore's limited domestic pool of companies and investors, the exchange faces long-term structural challenges in sustainably diversifying into high-growth areas such as digital assets and ESG products, which could cap future revenue growth and stall the expansion of earnings and net margins.

Valuation

• The assumed bullish price target for Singapore Exchange is SGD18.06, which represents two standard deviations above the consensus price target of SGD14.36. This valuation is based on what can be assumed as the expectations of Singapore Exchange's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SGD18.3, and the most bearish reporting a price target of just SGD10.3.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be SGD1.7 billion, earnings will come to SGD765.5 million, and it would be trading on a PE ratio of 31.1x, assuming you use a discount rate of 7.1%.
• Given the current share price of SGD15.79, the bullish analyst price target of SGD18.06 is 12.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.