Singapore Exchange (SGX) has also been hit by the recent
volatility in the market. Its share price has fallen in line with its
regional peers, down about 57% from its 52-week high. This is reflective of
the generally weak sentiment in the market where trading volume has fallen
in Feb and Mar this year. Taking these factors into account, we have
imputed the drop in trading activities into our 2H FY08 estimates, and
lowered FY08 earnings by 11.7% to S$428.6m and FY09 earnings by 12.4% to
S$434.5m. Using lower valuation of 21x (versus 19x for its regional peers
and 23x for its global peers), we are lowering our fair value estimate to
S$8.20 (previous: $11.20). As SGX’s stable revenue (terminal, listing,
price information and other fees) is fairly secured, we believe that
together with the attractive yield of 4.9% at current price level, the
stock is starting to look attractive again, especially for medium to longer
term holders as SGX continues to grow its suite of products and services to
buoy its long term income. With recent volatile market conditions and on
price weakness, SGX is a BUY. (Carmen Lee - Head, OCBC Investment Research)
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