Published June 9, 2009

DBS Vickers raises SGX target price

The brokerage firm upped the target price to $9.10 from $7.80 earlier

By JAMIE LEE

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DBS Vickers Securities has raised its 12-month target price for the stock of Singapore Exchange (SGX) to $9.10 - the highest now among the target prices of 20 analysts polled by Bloomberg.

Reiterating its 'buy' call on SGX, DBS Vickers said the exchange's average daily volume and value rose to 3.2 billion units and $2.3 billion respectively last month - up from April's 1.8 billion units and $1.3 billion.

'Even for the past week, volume and value appear sustainable and high at 3.1 billion and $2.2 billion respectively,' it said in a client note yesterday.

DBS Vickers said SGX is currently trading at a forward price-to-earnings (P/E) ratio of 17 times, which is lower than Hong Kong's 29.8 and Bursa Malaysia's 36.

It upped the target price to $9.10 from $7.80 earlier and raised its FY2010 average daily turnover (ADT) to $2.4 billion from $1.7 billion.

This follows an earlier rating upgrade of SGX to 'outperform' from 'underperform' by CIMB-GK.

'Time to re-look,' said analyst Kenneth Ng, who raised his target price from $5.67 to $7.84, noting that the current global equity rally seems more sustainable than previous rallies.

'Tracking the four key index futures contracts in SGX's derivatives stable, March and April volumes have already recovered from November 2008 to February 2009 levels,' said Mr Ng in a May 22 report.

His earlier concern that the blow-up over S-chips would hamper listing pipelines and turnover velocities and drive business to Hong Kong now seems 'overblown', he added.

But DMG & Partners Securities Leng Seng Choon kept his 'sell' call in a May 27 report, noting that his revised target price of $6.20 - up from $3.95 - factors in a P/E ratio of 20 times that is 'close to the average 21 times that SGX traded at over the past three-and-a half years'.

'SGX target price would be $7.10 if FY2010 ADT hits $1.71 billion . . . however, we are not so optimistic,' Mr Leng said.

Half of the 20 analysts polled by Bloomberg have 'buy' calls on SGX. The remainder is made up of five 'hold' and 'sell' calls each.

The stock of SGX has surged 88.5 per cent from its year-low of $4 in March. It closed at $7.54 yesterday, down 3.33 per cent.