S68: Equity Market Flows And Execution Will Shape Balanced Returns Ahead

Analysts have modestly raised their fair value estimate for Singapore Exchange to about S$16.74 from S$16.43, reflecting slightly stronger assumptions for revenue growth, profitability, and earnings multiples following recent research that highlights improving equity market flows.

Analyst Commentary

Recent research has highlighted a more balanced outlook for Singapore Exchange, with the latest move seeing the stock upgraded to Neutral from Underweight and the price target lifted to S$16 from S$14. This shift reflects an improved assessment of execution on strategic initiatives to deepen equity market activity, alongside a more constructive view on medium term earnings resilience.

Bullish Takeaways

• Bullish analysts point to improving equity market flows as an early sign that initiatives to boost trading volumes and product breadth are starting to translate into tangible revenue growth.
• The higher price target of S$16 suggests rising confidence that earnings can compound at a steadier pace, supporting a rerating closer to the updated fair value estimate.
• Stronger execution on equity related strategies is seen as enhancing the quality and visibility of fee income, which underpins a more resilient profit profile through market cycles.
• The upgrade from Underweight to Neutral indicates that potential downside risk to valuation has narrowed, with a more balanced risk reward skew over the next 12 to 18 months.

Bearish Takeaways

• Bearish analysts caution that the Neutral stance, rather than an outright Overweight, signals lingering uncertainty over the durability of improved equity flows in a potentially volatile macro environment.
• There are concerns that, while the price target has increased, upside to the current share price may be limited if revenue growth from new initiatives falls short of expectations.
• Execution risk remains around expanding higher margin products and sustaining liquidity, which could weigh on operating leverage and restrain further valuation multiple expansion.
• Some remain wary that competitive pressures and regulatory changes could cap longer term growth in trading and listing activity, tempering enthusiasm despite the recent upgrade.

What's in the News

• SGX Derivatives will launch regulated Bitcoin and Ethereum perpetual futures on 24 November 2025, bringing institutional grade clearing and margining to one of crypto's largest product segments and aiming to capture a share of over USD 187 billion in daily global perpetual volumes (Key Developments).
• SGX Indices introduced the CSI SGX Asia 100 and CSI SGX Asia 100 Dividend Focus indices, expanding Asia focused benchmarks and deepening its collaboration with China Securities Index to provide diversified exposure to 100 of the region's largest companies (Key Developments).
• SGX Group is rolling out a new trading engine, Iris ST, with planned go live in the latter half of 2027, alongside proposed rule changes including new auction price collars, an extended non cancel auction phase and a new pre trade risk control system to enhance market resilience (Key Developments).
• Shareholders approved a final tax exempt dividend of 10.5 cents per share for FY2025, and SGX signalled a steady dividend increase of 0.25 cents every quarter from FY2026 to FY2028, underscoring confidence in cash flow visibility (Key Developments).
• SGX launched the Indonesia Singapore Depository Receipt Linkage, allowing investors in Singapore to trade SDRs over key Indonesian names such as Bank Central Asia, Telkom Indonesia and Indofood CBP in Singapore dollars during SGX hours, strengthening ASEAN market connectivity (Key Developments).

Valuation Changes

• The fair value estimate has risen slightly to about SGD 16.74 from SGD 16.43, implying a modestly higher assessed intrinsic value for Singapore Exchange shares.
• The discount rate has edged up marginally to about 6.97 percent from 6.91 percent, reflecting a slightly higher required return embedded in the valuation model.
• The revenue growth assumption has increased slightly to about 5.65 percent from 5.51 percent, indicating a small uplift in expected top line expansion.
• The net profit margin has improved modestly to about 49.31 percent from 48.91 percent, signalling a minor upgrade to long term profitability expectations.
• The future P/E multiple has risen slightly to about 27.32 times from 27.10 times, suggesting a small increase in the valuation multiple applied to forward earnings.