a different beat

9.11

November 16, 2020

Fin

ancia

ls

Sin

gapore

THIS REPORT HAS BEEN PREPARED BY MAYBANK KIM ENG RESEARCH

SEE PAGE 38 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Co. Reg No: 198700034E MICA (P) : 099/03/2012

ESG Tear Sheet Insert

Thilan Wickramasinghe [email protected] (65) 6231 5840

Singapore Exchange Ltd (SGX SP)

A different beat

SGX is transforming. This offers opportunities

SGX has evolved from a cash-equities exchange to a pan-Asian, multi-

asset platform offering derivatives, fixed income and alternative

products. This positions it to benefit from multiple structural trends that

are driving demand for risk-management products. Its balance sheet has

the capacity to gear up offering significant dry-powder for accretive,

bolt-on acquisitions in growth segments. While SGX’s cash-equities

business is ex-growth, it enjoys high operating leverage and contributes

to dividend visibility. Its valuations are un-stretched (trading at mean

PE), while offering a highly visible 3.5% yield. Initiate BUY with target

price of SGD10.77 for 18% upside.

Right place, right time, right solutions?

SGX’s non-cash equities businesses contribute 62% of revenues (vs 38% in

FY12). We estimate this to rise to 74% by FY23E, underpinned by higher

volumes in its product suite of index, FX and commodity derivatives. This

is driven by rising demand for risk management as a result of increased

market volatility, stricter regulations, digitisation of OTC, expanding

passive investing and reconfiguration of supply chains. Deep liquidity in

its products and a strong execution track record should provide SGX with

a competitive advantage vs rivals regionally, we believe.

Cash equities: slow growth, cash cow

Delistings have outpaced IPOs by 40% since FY12. The lack of a hinterland

like China has kept market velocity a third below HK levels. However,

this segment offers strong operating leverage. We estimate that segment

revenues generated above a market ADV of SGD580m flows directly to

EBITDA. Singapore’s ADV has been 2x higher than this in the past 5 years.

Hence, we believe this segment – while seeing low growth - should

continue to be a key support for dividend visibility going forward.

Initiate with BUY and SGD10.77 TP. 18% upside

SGX has much lower total debt to equity than peers (24% vs 68%). Flexing

its balance sheet should give it significant headroom for complementary

bolt-on acquisitions. In the meantime, the Group is trading at a 21.7x

FY21E PE – its long term mean, while offering a highly visible dividend

yield due to its quarterly, absolute dividend policy. Upside risks exists for

a higher payout ratio going forward, we believe. Our blended multi-stage

DCF (WACC 7.2%, 1% terminal growth) and peer PE (27x target) TP offers

18% upside. Initiate with BUY.

Share Price SGD 9.11

12m Price Target SGD 10.77 (+18%)

BUY

Company Description

Statistics

52w high/low (SGD)

3m avg turnover (USDm)

Free float (%)

Issued shares (m)

Market capitalisation

Major shareholders:

23.3%

2.4%

2.0%

1,072

19.6

Singapore Exchange Ltd. operates a multi-asset

exchange including Singapore's sole equities trading

venue

Temasek Holdings Pte Ltd. (Investment Co

The Vanguard Group, Inc.

BlackRock Fund Advisors

10.39/8.00

74.2

SGD9.8B

USD7.2B

Price Performance

90

110

130

150

170

190

210

230

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20

SGX - (LHS, SGD) SGX / Straits Times Index - (RHS, %)

-1M -3M -12M

Absolute (%) (1) 5 3

Relative to index (%) (7) 0 23

Source: FactSet

FYE Jun (SGD m) FY19A FY20A FY21E FY22E FY23E

Revenue 910 1,053 1,004 1,094 1,174

EBITDA 524 656 574 605 638

Core net profit 391 472 452 478 506

Core FDEPS (cts) 36.4 43.9 42.1 44.4 47.1

Core FDEPS growth(%) 7.7 20.5 (4.2) 5.7 5.9

Net DPS (cts) 30.0 30.5 31.7 33.5 35.4

Core FD P/E (x) 21.7 19.0 21.7 20.5 19.4

P/BV (x) 7.8 7.2 7.7 7.0 6.4

Net dividend yield (%) 3.8 3.7 3.5 3.7 3.9

ROAE (%) 35.8 40.4 35.9 35.9 34.8

ROAA (%) 18.4 19.6 16.6 16.4 15.8

EV/EBITDA (x) 15.3 13.0 16.2 15.2 14.2

Net gearing (%) (incl perps) net cash net cash net cash net cash net cash

Consensus net profit - - 435 442 451

MKE vs. Consensus (%) - - 4.0 8.1 12.2

November 16, 2020 2

Singapore Exchange Ltd

Value Proposition

SGX operates Singapore’s only securities exchange and a

regional derivatives exchange. It also provides support

services and trading infrastructure.

While its beginnings are rooted as a cash-equities

exchange, the group is diversifying away to become a

multi-asset, risk management trading venue.

It has built deep liquidity pools and sizable market share

in key risk management derivative products, which gives it

a competitive advantage over regional exchanges.

SGX’s traditional cash-equities business is ex-growth and

losing market share to regional exchanges – particularly

North Asia. But this segment enjoys high operating

leverage, which provides better dividend visibility.

SGX’s revenue mix shifting towards derivatives

Source: Company

Price Drivers

Historical share price trend

Source: Company, Maybank Kim Eng

1. SGX announces proposals for dual-class listings and

broader single stock futures introduction

2. Rising concerns over the potential loss of India derivative

contract licensing due to on-shoring

3. Rising commodity prices – particularly iron ore – driving

expectations of higher FICC income

4. Strong delivery of 1Q20 PAT underpinned by rising

derivative income

5. Loss of MSCI licensing partnership to HKEX

Financial Metrics

Equity derivative volume increased at 5% CAGR in the past

5 years. We expect the pace to double to 10% CAGR FY21-

23E, supported by higher regional risk management

demand.

Cash-equity market velocity reached 37% amid COVID-19

liquidity in FY20. We expect this to trend towards

historical run rates of around 30% as conditions normalise.

Although opex was contained at +3% YoY in FY20, we

expect this to accelerate by 8% YoY in FY21E as tech

spending and staff costs normalise.

Opex set to accelerate in FY21E

Source: Company

Swing Factors

Upside

A sooner-than-expected COVID-19 macro recovery may

drive higher market volumes and liquidity.

Value-accretive M&A that may complement existing

business segments.

New licensing agreements for derivative products or

unique in-house index products can drive volume upside.

Downside

Disruption to SGX technology infrastructure leading to

halts in trading can have a material impact on earnings

as well as market confidence.

Cancellation or losses of derivative licensing agreements

can have a material volume and fee impact.

Advent of disruptive FinTechs and off-exchange trading

solutions.

[email protected]

[email protected] thilanw@maybank-

0%

20%

40%

60%

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100%

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

FICC Equities - Cash Equities - Derivatives DCI

80

90

100

110

120

130

140

150

160

6.5

7.0

7.5

8.0

8.5

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10.0

10.5

Nov-15 Nov-16 Nov-17 Nov-18 Nov-19

SGX - (LHS, SGD) SGX / Straits Times Index - (RHS, %)

-5%

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mailto:[email protected]











November 16, 2020 3


ESG [email protected]

Business Model & Industry Issues

As Singapore’s sole securities exchange and as a self-regulatory organisation, SGX faces significant reputational and

regulation risks. Disruptions to operating its markets in a fair, orderly and transparent manner could have material social

and financial risks to market participants, the financial system and the general public

SGX’s heavy reliance on technology exposes it to risks on systems resiliency, cyber security and data protection. Increasing

electronification of markets are set to broaden these risks further

While the Group does disclose next-year targets and KPI on ESG metrics (especially on energy usage, HR etc.) there is

limited disclosures or commitments on time-bound, medium/long term sustainability goals

It has an almost even balance in gender diversity. However, notable pay gaps favouring males exists for middle management

SGX is rated AA by MSCI ESG Ratings and is included in several sustainability best practice related indices

Material E issues

SGX formulated and launched an Environmental Policy in

2016 which encapsulates direct and indirect impacts on

energy consumption

As a firm heavily reliant on technology, there is a

significant dependency on readily available energy.

Starting from FY20, SGX is using Renewable Energy

Certificates to offset electricity consumption in its offices

The Group’s primary datacentre has been awarded the

SS564 certification for Green Datacentres and its

secondary datacentre has a BCA Green mark Platinum

certification

Key G metrics and issues

As a self-regulatory organisation, SGX faces significant

regulation and reputation risks. While SGX’s RegCo is

segregated and governed as an independent

organisation, perceptions of balancing corporate

profitability with market integrity risks remain

As a business model heavily reliant on technology,

significant risks exist on service availability, capacity,

latency, cyber security and data protection. The Group

uses self-assessment benchmarked to history as well as

global peers to monitor operational resiliency. There

are data protection policies in place, while it deploys

machine learning to detect early signs of trouble in its

systems

SGX conducts an independent annual institutional

investor perception survey to receive feedback on

corporate strategy, management team, governance

etc. It also conducts regular public consultations for

feedback on rules changes

The Group has policies in place for Conduct & Ethics,

Staff Dealing, Regulatory Conflicts, Whistleblowing

Sustainability strategy and execution is conducted

through the Executive Management Committee (EMCO),

which includes the CEO. There is no disclosure on

Board level sustainability representation except for the

EMCO’s advisory role

73% of the Board are classified as Independent. Only

27% of directors are female. For mid-level employees,

a gender pay gap of around 2-8% exists favouring males

SGX reports under the GRI framework and is part of the

Bloomberg ESG Data Index, Bloomberg Gender-

Diversity Index, MSCI World ESG Leaders Index, iSTOXX

Global ESG Select 100 Index and iEdge SG ESG Leaders

Index

Material S issues

SGX’s primary social responsibility is to ensure the

participation in its markets are carried out in a fair,

orderly and transparent manner

Disruptions to its market or regulatory operations can have

material social risks to the financial community, retail

investors and the public at large

The Group needs to ensure operational resiliency. SGX

regularly conducts BCP and pandemic scenario testing

It is increasing financial inclusivity through stakeholder

education – particularly for retail investors by reaching out

through the SGX Academy

The Group has articulated clear FY21 targets social-

economic engagement. Longer term targets are not

disclosed

November 16, 2020 4


Focus Charts

Fig 1: Derivatives materially increasing revenue share, while cash-equities should continue to decline

Source: Company data, Maybank Kim Eng

Fig 2:Significant MoM regional market volatility driven by COVID-19 and macro factors. Expect this to remain elevated

Source: Factset, Maybank Kim Eng

Fig 3: Monthly open interest to volumes show SGX has deep liquidity. This allows for better risk management solutions

Source: SGX, HKEX, Maybank Kim Eng

Fig 4:Cash-equities is ex-growth, but enjoys high operating leverage. This improves dividend visibility


Fig 5: SGX is trading just under mean PE 12-month fwd, which we believe is a decent entry point

Source: Bloomberg, Maybank Kim Eng

Fig 6: Lower than peers total debt to equity offers opportunities for gearing up and M&A catalysts

Source: Maybank Kim Eng

10% 10% 11% 14% 14% 13% 14% 15% 16% 19% 22% 24%

62% 60% 57% 50% 48% 49% 47% 37% 38% 32% 30% 26%

17% 20% 21% 26% 27% 26% 28% 37% 34%

35% 35% 36%

11% 10% 11% 10% 11% 12% 12% 11% 12% 14% 14% 14%

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FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

FICC Equities - Cash Equities - Derivatives Data, Connectivity, Indices

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Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20

KLCI STI HSE SET China-A JSE

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FY18 FY19 FY20 FY21E FY22E FY23E

Average daily value ADV (SGDm) LHS

Flow directly

to EBITDA

16.0

18.0

20.0

22.0

24.0

26.0

28.0

(x)

+1SD = 24.0x

Mean = 21.9x

-1SD = 19.8x

-10%

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30%

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70%

90%

110%

130%

150%

Total Debt to Equity Average

November 16, 2020 5


1. Right place, right time, right solutions?

Changing business mix

SGX operates Singapore’s securities exchange as well as a regional

derivatives exchange along with support services and infrastructure. It has

been evolving from a traditional cash-equities exchange to a broader,

multi-asset solution. The Group’s non-cash equities businesses contributed

62% of revenues in FY20 compared to just 38% in FY12.

Fig 7: SGX’s revenues by business segment (%)

* From 1Q FY20, SGX changed their revenue reporting segments to FICC, Equities and Data, Connectivity and Indices. MKE has restated historical revenue line items under these headings. These are based on company guidance together with estimates.


We estimate this to rise to 74% by FY23E, underpinned by higher volumes

in SGX’s product suite of index, FX and commodity derivatives. The

Group’s derivative market turnover growth has overtaken securities

market growth since FY14.

Fig 8: Securities vs. derivatives turnover (Indexed to FY12=100)


10% 10% 11% 14% 14% 13% 14% 15% 16% 19% 22% 24%

62% 60% 57% 50% 48% 49% 47% 37% 38% 33% 28% 26%

17% 20% 21% 26% 27% 26% 28%

37% 34% 34% 36% 36%

11% 10% 11% 10% 11% 12% 12% 11% 12% 13% 14% 14%

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FICC Equities - Cash Equities - Derivatives Data, Connectivity, Indices

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FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Securites Derivatives

November 16, 2020 6


Indeed, derivative volumes in FY20 reached 3x higher than FY12 levels.

Contrastingly, securities volumes have remained flat to slightly below

those levels.

1.1 Structural drivers increasing demand for Risk

Management Solutions We believe risk-management-driven derivative volumes should continue to

see an upward trajectory, fuelled by several drivers. These include:

1. Rising market volatility

2. Stricter regulations

3. Digitisation of fixed income & OTC

4. More passive investing

5. Reconfiguration of supply chains

These factors should allow for complementary positioning of SGX’s

product offerings, in our view. The Group offers a wide array of solutions

and risk-management products.

Fig 9: SGX’s product suite Securities Fixed Income Derivatives Indices

Stocks

Retail Fixed Income Securities Equity Index Futures Equity Indices

REITS

Wholesale Fixed Income Securities Single Stock Futures Derivative Indices

Business Trusts

SGX Bond Pro - OTC Trading FX Futures & Options Fixed Income Indices

ETF

Dividend Index Futures Custom Indices

Leveraged & Inverse Products

Interest Rate Futures & Options Straits Times Indices

Daily Leverage Certificates

Iron Ore Futures & Options Third-party Indices

Structured Warrants

Freight Futures & Options Cryptocurrency Indices

ADRs

Rubber Futures & Options

Coal Futures & Options

Oil Futures & Swaps

Petrochemical Futures & Swaps

Electricity Futures

Source: Company data

1.1.1 Rising market volatility

Even prior to the COVID-19 pandemic, market volatility has been rising

rapidly in Asia.

This has been due to US-China trade war tensions, geopolitical uncertainty

in the South China Sea as well as massive levels of liquidity injections post

the Global Financial Crisis (GFC). Low interest rates have also been a

contributing factor.

The advent of COVID-19 and the resultant lockdowns and travel

restrictions have further increased uncertainty and lowered market

visibility.

This is being reflected in the markets regionally, with major indices across

Asia (as well as globally) displaying significant volatility YTD.

November 16, 2020 7


Fig 10: Asia stock indices MoM performance YTD (%)


This volatility is unlikely to wane going forward with economic activity

expected to remain under pressure and individual country GDP recovery

trajectories taking widely different paths to normalisation.

Fig 11: Regional GDP growth expectations (%)

2017 2018 2019 2020F 2021F

Indonesia 5.1 5.2 5.0 -1.4 4.5

Malaysia 5.7 4.7 4.3 -5.4 5.1

Philippines 6.7 6.2 6.0 -6.5 4.5

Singapore 4.3 3.4 0.7 -5.7 4.0

Thailand 4.1 4.2 2.4 -7.2 5.0


Fig 12: VIX Index


As measure of global volatility, we see that the VIX has also been

indicating significant turbulence – particularly in 2020. But even if you

ignore 2020 as a whole, the past few years have also experienced

significant gyrations.

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KLCI STI HSE SET China-A JSE

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Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20

November 16, 2020 8


1.1.2 Stricter Regulations

Following the GFC, there has been significant push towards increasing

transparency and stability of the financial system. International standard

setting bodies and regulators including the FSB, IOSCO, CPMI and BCBS

have been pushing for reforms to encourage centralise clearing and

improving information availability.

Specifically, regulations that are implementing Uncleared Margin Rules are

estimated to impact a significant portion of derivative trades from

September 2020. These rules will make trading bilateral FX options over-

the-counter (OTC) significantly more expensive, according to Greenwich

Associates. As a result, more of these trades should get pushed on to

exchanges and electronic trading.

Fig 13: Proportion of FX volumes traded electronically (2018)

Source: Greenwich Associates

Separately, the US SEC has amended its rules to enhance requirements for

more market disclosures and investor protection for OTC derivatives since

September 2020.

In 2019, Singapore’s MAS rolled out amendments to the mandatory OTC

derivative trading obligations. Starting from April 2020 this is encouraging

more trading to go into organised markets.

Increasingly, we believe regulators would continue to favour on-market

derivative trading as a means of ensuing better transparency and market

stability going forward.

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Spot DeliverableForwards

Swaps Non-deliverableForwards

Options

https://www.profit-loss.com/report-regulation-to-drive-fx-options-towards-exchanges/

https://www.profit-loss.com/report-regulation-to-drive-fx-options-towards-exchanges/

https://www.financemagnates.com/institutional-forex/regulation/sec-updates-regulations-for-otc-market-issues/

https://www.regulationasia.com/mas-publishes-finalised-mandatory-trading-regulations-for-derivatives/#:~:text=The%20mandatory%20trading%20obligation%20will%20apply%20to%20all%20specified%20derivatives,the%20SGD%2020%20billion%20threshold).

https://www.regulationasia.com/mas-publishes-finalised-mandatory-trading-regulations-for-derivatives/#:~:text=The%20mandatory%20trading%20obligation%20will%20apply%20to%20all%20specified%20derivatives,the%20SGD%2020%20billion%20threshold).

November 16, 2020 9


1.1.3 Digitisation of Fixed Income

The fixed-income market has been traditionally offline and conducted

over the counter. According to Vanguard, this is now changing driven by:

Increased regulations for transparency

Dealers reducing bond inventories due to new capital requirements

and reduction in resources

Increase in electronic and algo-driven trading

Higher participation of ETFs and target asset allocation funds

These factors are accelerating growth for on-market fixed income trading.

Fig 8 below shows the pace of growth in US investment grade bond trading

electronically vs. the total market (which is largely traditional trading).

Fig 14: US High Yield Bond Trading Growth YoY (%)

Measured by growth in average daily trading volume. Electronic growth proxy MarketAxcess US high grade trade volume data. Total market growth estimated from FINRA and TRACE reporting

Source: Vanguard, MarketAxess,Maybank Kim Eng

We believe these trends will expand globally, including Asia. This should

have a positive impact for fixed income listing and trading platforms such

as BondPro offered by SGX. Separately, in September 2020, SGX – together

with HSBC and Temasek - completed a digital bond issuance using digital

asset technology leveraging smart contracts and distributed ledgers. Issues

such as these should support acceleration of on-market, electronic bond

transactions further, in our view.

Separately, subsidies offered by the Monetary Authority of Singapore (MAS)

to encourage first time bond issuance in Singapore should be an additional

tailwind, we believe. According to its Singapore Corporate Debt Market

Development Report 2019, average annual first-time debt issuance

doubled in 2017-2019 vs 2014-2016 as a result of the Asian Bond Grant

scheme launched in 2017. The MAS’ Sustainable Bond Grant Scheme,

which supports ESG-linked debt issuances with subsidies for offsetting

external review costs, should also encourage more bond issuances in

Singapore, we believe. This scheme is set to run till May 2023.

0

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November 16, 2020 10


1.1.4 More Passive Investing

ETF assets under management are rising rapidly across Asia-Pacific,

according to PwC. Indeed, regionally there is an acceleration of innovative

ETF launches including products such as smart beta and factor investing.

Regional smart beta ETF AUM has tripled since 2013 (Fig 10).

Fig 15: Global ETF AUM

Source: Statista, Maybank Kim Eng

Fig 16: APAC Strategic Beta AUM

Source: PwC, Maybank Kim Eng

Additionally, there is increasing demand for sustainable investment driven

by increasing focus on environmental and climate risks. This should also

drive higher product innovation in the region, especially around ETFs.

Also rising climate risks are likely to increase market volatility going

forward, driving up demand for hedging products, in our view.

Fig 17: Global Principle of Responsible Investment (PRI) signatory AUM

Source: UNPRI, PwC, Maybank Kim Eng

SGX’s acquisition of Scientific Beta – an index development firm

established by EDHEC Risk Institute – should support it with a credible

pipeline of product offerings in this space over the medium term, we

believe.

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1.1.5 Reconfiguration of supply chains

Uncertainty and unpredictability of US-China relations and disruptions

experienced due to COVID-19 should accelerate supply chain relocation

from North Asia to Southeast Asia, in our view.

Fig 18: Top-2 redirected investment destinations for MNCs in China

Source: AmCham Shanghai, Maybank Kim Eng

Fig 19: Chinese investments in US and ASEAN

Source: China Global Investment Tracker

As corporates adopt a China + 1 supply chain strategy (see Recovery &

Reconfiguration, 29 Nov 2019), Singapore should benefit given its role as

an AAA rated global financial centre and host to multiple regional MNC

HQs. This should drive up demand from corporate treasuries for risk-

management solutions, where SGX’s product suite is complementary, in

our view.

Deep liquidity in these products and a strong execution track record

should provide SGX with a competitive advantage vs rival offerings

regionally.

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1.2 SGX is leveraged to benefit from growth drivers We believe SGX has built a comprehensive product suite that provides

investors with opportunities to manage risks as the operating environment

in Asian markets evolve.

By way of background, in May 2020, SGX discontinued its 23-year licensing

agreement with index provider MSCI. At the same time HKEX announced a

fresh partnership with MSCI to move its futures and option derivative

products to Hong Kong. This has resulted in SGX winding down its MSCI-

index linked futures contracts with a target of fully exiting by February

2021. The exception is the MSCI Singapore contract, which will remain

listed in Singapore.

In August 2020, SGX signed a strategic partnership with FTSE Russell and

has accelerated migration of its MSCI Index products to the new

partnership.

In our view, this background of major change and migrations offers a clear

opportunity to test SGX’s product resilience.

A critical success factor the Group has built up is to support deep liquidity

in its key product offerings. We believe that once a strong level of

liquidity is created within a trading venue, it is harder for a rival to come

in and take away market share – even if the pricing is competitive.

1.2.1 Deep product liquidity

An example of its deep liquidity competency is the SGX Taiwan Index

Futures Contract. SGX has been a primary trading venue for this contract.

In 3Q20, the MSCI version of the contract migrated to HKEX, while SGX

introduced the FTSE-Russell version. At the same time the MSCI Taiwan

contract also continued to trade on SGX during the quarter.

Fig 20: Taiwan Futures Contract Volumes by Product and Venue

Source: SGX, HKEX

We observe that despite being introduced at the same time, the FTSE-

Russell Taiwan Contract on SGX saw 10x higher volumes vs. the MSCI

Taiwan Contract in HKEX. Also the volumes of the MSCI Taiwan Contract

on SGX remained stable between 2Q20 and 3Q20 despite an identical

product being offered in Hong Kong.

-

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2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2Q20 3Q20

MSCI Taiwan - HKEX FTSE Taiwan - SGX MSCI Taiwan - SGX

Launched July 2020



We believe this is a key example of the strength of SGX as a trading venue

and it is harder for competitive pressure to erode share simply by offering

an identical product elsewhere without the visibility on liquidity.

1.2.2 Strong product market share

SGX has also been able to create strong market share in key products. This

in turn supports deeper liquidity. This provides a critical stickiness from

competitive products from other trading venues – even if they are larger

markets.

Examples of this include SGX’s CNH USD FX Futures Contract as well as the

USD INR FX Futures Contract. In both these cases, similar contracts are

listed in larger trading venues such as HKEX and CME. Nevertheless, SGX

has been able to preserve and grow its market share.

Fig 21: CNH USD FX Futures Contract Volumes

Source: CME, HKEX, SGX

Fig 22: USD INR FX Futures Contract Volumes

Source: CME, HKEX, SGX

Separately, the Group has built a strong domain in commodity derivatives

including the steel supply chain and rubber. Structural growth in affluence

in Asia, rising urbanisation together with Singapore’s commodity hub

status, complements SGX’s product offering. We believe this provides a

significant strategic advantage to SGX over other regional exchanges.

Fig 23: SGX derivative product volume growth YoY (%)


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2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

9M19 9M20

CME HKEX SGX

-10%

0%

10%

20%

30%

40%

50%

60%

FY19 FY20 FY21E FY22E FY23E

Currency futures Iron Ore derivatives Rubber futures Freight derivatives Equity Derivatives



According to management, SGX is deepening its product suite in derivative

products to include more currencies, commodities and equities. An

example of this is Single Stock Futures (SSFs). SGX offers a selection of SSF

that cover Singapore and Indian stocks. In June 2020, it launched 10 SSF

covering some of the larger market cap components of the MSCI Singapore

Free Index. Off a low base, SSF volumes saw a 180% YoY increase in FY20

and we estimate continued strong growth in this segment as SGX

introduces new SSFs as well as growing liquidity for its existing offerings.

Overall, we estimate SGX’s existing derivative contracts to expand at 11%

CAGR between FY20-23E. The introduction of new contracts - especially as

SGX leverages its FTSE-Russell partnership - can drive growth to surprise

on the upside, in our view.

This should be a key driver in keeping overall liquidity for derivatives at

healthy levels. Monthly derivative open interest to total contracts

averaged 30% since December 2015.

Fig 24: Monthly derivative open interest to total contracts

Source: SGX, Maybank Kim Eng

SGX’s deeper derivative liquidity offering becomes clearer when looking at

monthly derivative open interest to total volumes by product type

compared to HKEX – the primary competitor financial centre for Singapore.

Fig 25: Monthly futures open interest to volumes YTD


Fig 26: Monthly options open interest to volumes YTD


In both product groups, SGX has consistently displayed significantly higher

liquidity, we observe.

15%

20%

25%

30%

35%

40%

Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%


SGX Futures HKEX Futures

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%


SGX Options HKEX Options



1.2.3 Fixed Income Centre

SGX has seen strong growth in volumes as a Fixed Income listing centre.

Singapore is a wealth and fund management hub with total assets under

management of SGD4 trillion in 2019, according to the MAS. This has been

increasing at a CAGR of 11% in the past 5 years.

Fig 27: SGX new bond listings


With a broad level of liquidity, we believe Singapore should continue to

benefit as a bond listing destination. In YTD 2020, 90% of total bonds

listed were from overseas origins. Additionally, as we discussed earlier, an

accelerating shift to exchanges for bond trading and listing globally should

further strengthen SGX’s advantages here, in our view.

Fig 28:FX breakdown of bond issuances 2018

Source: MAS

Separately, Singapore’s position as a Global FX centre, further strengthens

its attractiveness as a bond listing destination. SGX’s wide FX futures and

options product suite complements this offering investors hedging

opportunities.

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

0

500

1,000

1,500

2,000

2,500

FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

New bond listings New bond listings YoY (%)

SGD USD GBP EUR AUD HKD RMB Others

https://www.straitstimes.com/business/banking/singapores-assets-under-management-jumped-157-to-4-trillion-in-2019-mas

https://www.straitstimes.com/business/banking/singapores-assets-under-management-jumped-157-to-4-trillion-in-2019-mas



1.2.4 Cross Asset Margining enhances cost-saving appeal

Cross Margining allows for the netting of margins across correlated

derivative products. This allows for margining cost savings for market

participants and also facilitates them to hold more exposure for a given

quantum of margins.

Fig 29: SGX Cross Asset Margining Example

Product USD CNH FX

Futures Nikkei 225

Index Futures Total Margin

Exposure USD 100,000 100,000 Margin Requirement 1.4% 4.1% Outright Margin (A) 1,400 4,100 5,500

Cross-Product Margin Offset (B) 31% 31% Margin Requirement after deducting offset

(A) x [100%-(B)] (C) 966 2,829 3,795

Margin Savings vs. Outright Margin (A) - (C) 434 1,271 1,705

* Based on SGX Margin Schedule 03 Feb 2020


Many exchanges offer this facility. However, given SGX’s wide product

suite, this allows for broader cross-margin applications to market

participants. This should in turn support better liquidity across products,

in our view.



1.2.5 Monetising data and connectivity

Increasing use of technology in trading and rising share of high-frequency,

algorithmic trading is driving client demand for better connectivity to

SGX’s IT infrastructure. SGX monetises this by offering trading system

connections, network linkages and data-centre co-locations for market

participants. Increasing derivatives connectivity subscriptions should be a

key driver for growth here going forward given more derivative product

listings and rising liquidity in this segment.

Additionally, SGX also supplies pricing data, company announcements and

financial indices, which are also monetised.

In the financial indices segment, the Group provides independent index

calculation services as well as its own proprietary indices. These include

the ‘iEdge’ branded indexes on segments such as S-REITS, Sustainability,

APAC Dividend REITS etc. Additionally, the Group’s purchase of Scientific

Beta in February 2020 should give it access to proprietary ‘smart-beta’

indexes. SB was established in 2012 by the EDHEC-Risk Institute Asia. From

2010-2019, its assets under replication has increased 10x.

As we discuss in Section 1.1, ‘smart-beta’ products should see significant

demand going forward and SGX’s positioning with Scientific Beta should

allow it to be a credible player within this field.

Fig 30: SGX Market Data and Connectivity Revenues


Segment revenues for Market Data and Connectivity have increased by 8%

CAGR in the past 10 years. We estimate this pace will accelerate to 11%

CAGR FY20-23E as increased revenue support from Scientific Beta product

monetisation along with more derivative connectivity takes place.

Particularly for index product commercialisation, we believe the revenue

risks are on the upside.

-5%

0%

5%

10%

15%

20%

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0


Market Data and connectivity (SGD) LHS YoY (%) RHS



2. Cash Equities: Slow growth, cash cow

Over the past 10 years, SGX’s cash-equities revenues have contracted at a

1% CAGR. FY20 delivered the highest revenue since FY13, driven by a

COVID-19 trading boost largely due to higher retail participation. This is

likely the exception rather than the rule, we believe. Indeed, FY19

segment revenues were the lowest in our records since FY08.

Fig 31: SGX Cash Equities Revenue by Segment


We expect segment contributions to continue to contract going forward.

This could primarily be driven by limited hinterlands available to SGX to

keep cash equity momentum supported, as well as limited sectors offering

attractive listing valuations. Nevertheless, the cash-equities segment has

strong operating leverage offering continued dividend visibility.

2.1 Limited Hinterlands Unlike some of SGX’s regional rivals such as Malaysia and Thailand – SGX

has a very small domestic institutional or retail trading base. Also, it has

no large liquid neighbourhood linkage - like HKEX’s bridge to Mainland

China.

Fig 32: Bura Malaysia equities trading by investor type (Sep-20)

Source: Bursa Malaysia

Fig 33: SET equities trading by investor type 2019

Source: SET

0

50

100

150

200

250

300

350

400

450

500

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

SGDm

Listing Corporate Actions & others

Trading & clearing Securities settlement & depository management

Treasury & other

Local Institutional & Nominees Local Retial & Other Foreign Local Investors Local Institutions Prop Trading Foreign



Indeed, in Malaysia nearly half of trading volumes are driven by local

institutions, while local retail investors account for nearly 40%. In

Thailand, local institutional and retail investors account for nearly 50% of

trading volumes.

Fig 34: DBU share financing growth YoY (%)

Source: MAS, Maybank Kim Eng

As a global financial centre, funds domiciled in Singapore invest globally.

Therefore, SGX does not have much of a domestic support baseline. SGX

does not publicly disclose equities trading volume by investor type, but we

see that consumer lending for SGD share financing by the banking system

has been losing steam (Fig 28). This implies that overall retail

participation is structurally weakening in Singapore, in our view.

As a result, we believe market velocity in Singapore has been capped

compared to other regional markets – especially HKEX.

Fig 35:Average 3-year market velocity


-40%

-30%

-20%

-10%

0%

10%

20%

30%

Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Thailand Hong Kong Singapore Malaysia Indonesia



2.2 Limited niche sector valuations Historically, SGX has only a handful of unique sectors that offer materially

better equity valuations and liquidity. Examples include S-REITS,

Semiconductor Manufacturing, Healthcare and some Consumer names.

Especially in the current environment, with the exception of S-REITs, we

believe it is hard to argue that SGX has strong niche market dominance in

any of the other sectors.

This is different from its suite of derivative products where SGX has

several key offerings with deep liquidity and market share.

In the past, it has tried to introduce focused sectors – such as S-Chips,

Offshore & Marine, and Palm Oil - but the track record has been mixed.

Contrastingly, Hong Kong and China have successfully leveraged their deep

domestic liquidity to offer clearer niche sectors than SGX, we believe.

Similarly, many of the regional exchanges have also leveraged their core-

domestic industry sectors – such as Palm Oil in Malaysia or Consumer in

Thailand – to offer differentiation.

As a result, over the long term, we believe SGX’s competitive advantages

as a listings destination may erode viz-a-viz North Asia and specialised

sectors in regional exchanges.

Indeed, since FY12, de-listings have outpaced new listings by 40%. We

believe this trend is unlikely to reverse going forward.

Fig 36: SGX and Catalist: Total listings and de-listings


-50

-40

-30

-20

-10

0

10

20

30

40


Total listings Total delistings



2.3 Range-bound ADV Given the limited headroom for listings, overall market velocity and value

traded are likely to remain capped, in our view. Over the past 10 years,

SGX’s average daily value traded (ADV) has averaged SGD1.2b with a

standard deviation to mean of around 12%.

Fig 37: SGX ADV and velocity


According to management, SGX’s retail contribution to ADV is typically

20%. Such a low proportion further dampens liquidity and by extension

keeps overall ADV in a narrow range.

2.4 But a little can be a lot The structural disadvantages we discuss in earlier sections means that

SGX’s cash equities business is ex-growth, in our view

Fig 38: Estimate of Cash-Equities Direct Opex Share SGDm FY20 Comments

SGX Total Opex (A) 397 Staff Costs 215

Technology 69 Processing & royalties 54 Premises 10 Professional fees 13 Others 36 Estimated Cost Allocation - Cash Equities (%) (B)

Staff Costs 50% Assumed half with the rest split between Derivative,

FICC, Data

Technology 60% Larger share of tech to support transaction volumes,

speed

Processing & royalties 10% Limited royalties. Mostly royalties are allocated to

Derivatives Premises 30% Assumed to be split evenly across segments

Professional fees 30% Assumed to be driven largely by derivative/index

business Others 40%

Direct Opex for Cash Equities (A) x (B) 176 Percentage of total cash-equities revenue as a proportion of market ADV 30% Based on historical run-rates

ADV needed to cover direct Cash-Equities Opex (SGDm) 580 5-year average ADV (SGDm) 1,166 Difference (%) -50%


However, when placed in the context of BCG’s Growth Share Matrix, we

believe that this business segment displays the characteristics of a ‘Cash

20%

25%

30%

35%

40%

45%

-

200

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600

800

1,000

1,200

1,400

1,600

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

Average daily value ADV (SGDm) LHS Average market velocity (%) RHS



Cow’. It is low growth, but commands high market share – given it has a

monopoly as the sole equities trading venue in Singapore.

As one of the largest markets by capitalisation in ASEAN, the cash-equities

segment enjoys scale as well. This positioning is unlikely to be challenged

in the medium term, given limited policy discussions on liberalising and

introducing new trading venues in Singapore.

Fig 39: SGX ADV vs. minimum required to cover Opex


Within this backdrop, we believe the cash equities segment should benefit

significantly from high operating leverage. SGX does not disclose direct

operating costs by segment. We have derived this based on a set of

assumptions detailed in Fig 38.

From this we see that SGX requires an ADV of around SGD580m to ensure

direct opex is covered. All ADV above that flows directly to EBITDA. Over

the past 5 years, SGX ADV has averaged SGD1.2b – 102% above this

minimum.

Over the next three forecasts years, we conservatively estimate ADVs to

average SGD1b annually – levels last seen in FY19 – with market velocity

falling to 30% from the COVID-19 trading driven 37% in FY20. The risks

here are on the upside, especially following the US presidential election

victory by Democrat Joe Biden – which is strategically expected to favour

Asian risk assets.

As a result, we believe the cash equities segment should continue to

benefit from strong operating leverage despite being in an ex-growth

phase. This should provide significant support for SGX’s dividend visibility

going forward.

-

200

400

600

800

1,000

1,200

1,400

FY18 FY19 FY20 FY21E FY22E FY23E

Average daily value ADV (SGDm) LHS Minimum ADV needed to cover direct opex

Flow directly to

https://www.reuters.com/article/us-global-markets/risk-assets-cheer-biden-win-dollar-nurses-losses-idUSKBN27O0WV

https://www.reuters.com/article/us-global-markets/risk-assets-cheer-biden-win-dollar-nurses-losses-idUSKBN27O0WV



2.5 ADV does not drive share price Historically, there has been a tendency to link SGX’s share price

performance to ADV. The argument being that lower the ADV, lower the

earnings and therefore, weaker the share price. Our analysis shows no

significant correlation exits between SGX’s share price performance and

ADV across long or short timeframes.

Fig 40: Correlation between SGX share price and market ADV


Given the narrowing contribution by cash-equities to overall earnings, we

believe a correlation is unlikely to develop going forward either.

Separately, given the low participation of retail, there is very little

correlation between market volumes and interest rates. This is unlike

North Asian markets such as China where retail participation accounts for

70% of volumes across national exchanges. According to SCMP, China

added 6.4m new retail accounts in the first 5 months of 2020 – more than

the population of Singapore.

Fig 41: SGX ADV vs SIBOR

Source: Company data, Factset, Maybank Kim Eng

As a result, we believe despite the current low interest rate environment

outlook, it is unlikely to translate in to ADV upside for SGX.

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10-years 8-years 5-years 3-years

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FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E

Average daily value ADV (SGDm) LHS Average SIBOR (%) RHS

https://www.scmp.com/business/markets/article/3092591/china-fomo-swelling-rank-retail-investors-chasing-next-big-winners

https://www.scmp.com/business/markets/article/3092591/china-fomo-swelling-rank-retail-investors-chasing-next-big-winners



Given the market is weighted more towards market makers (around 10% of

ADV) and liquidity providers and institutional investors (more than 60%

ADV), we believe clearing fees effectively will be tight going forward.

Since FY12, fees have been coming off by around 1.1% annually.

Conservatively, we assume clearing fees to continue to see downward

pressure as the market mix continues to tilt towards market makers,

liquidity providers and algo-trading.

Fig 42: SGX Cash Equities Clearing Fees


-12%

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-2%

0%

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6%

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Effective Trading & clearing fee (bps) LHS YoY (%) RHS



3. Initiate BUY with TP of SGD10.77

3.1 Unchallenging valuations SGX is trading at a 12-month forward PE of 21.7x. This is at its long-term

average. While SGX has been listed since 2000, we define long-term from

the period starting from 2012. This is to reflect the broader

internationalisation of the Group and its diversification in to derivatives

etc. ramping up and reaching a level of maturity. The decade prior to this,

SGX’s primary strategic direction was as a cash-equities exchange. This

measure also excludes the volatility during the GFC.

Fig 43: SGX 12-mnth forward PE (x)


From a 12-month forward PB perspective too, it is trading at almost at its

long-term mean.

Fig 44: SGX 12-month forward PB (x)


We believe these valuations offer a decent entry point to the stock.

Historically, SGX has been viewed as a dividend-yield play. Here the stock

is offering a 3.5% FY21E dividend yield. Given its absolute dividend

payment policy, SGX offers superior dividend visibility amongst yield

stocks, we believe.

16.0

18.0

20.0

22.0

24.0

26.0

28.0

(x)

+1SD = 24.0x

Mean = 21.9x

-1SD = 19.8x

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

(x)

Mean = 7.7x

-1SD = 7.1x

+1SD = 8.4x



Fig 45: SGX 12-month fwd dividend yield (%)


SGX’s latest policy pays out a DPS of SGD0.08 quarterly. As a result, we

estimate a DPS of SGD0.32 for FY21E. However, we believe the risks are

on the upside.

Fig 46: SGX DPS and dividend payout ratio


With the exception of FY20, SGX’s dividend payout ratio has consistently

been above 85% in the past decade. In FY20, earnings grew 21% YoY – the

highest in a decade. This was underpinned by a strong growth in cash-

equity volumes (+26% YoY ADV YoY) driven by liquidity and QE measures.

However, overall COVID-19 bearish macro concerns seem to have kept the

dividend payout ratio at a conservative 69%. As a result, going in to FY21-

23E, we have conservatively assumed only a 75% payout ratio.

3.0

3.5

4.0

4.5

5.0

(%)

+1SD = 4.1%

Mean = 3.8%

-1SD = 3.6%

60%

65%

70%

75%

80%

85%

90%

95%

100%

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FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

DPS (SGD) LHS Payout Ratio (%) RHS



3.2 Potential value accretion from bolt-on acquisitions Prior to the GFC, SGX engaged in a few minority acquisitions. However,

starting with the purchase of the Baltic Exchange in London in FY17, the

Group has increased its pace of acquisitions and investments to support its

multi-asset growth strategy. A few notable additions are highlighted

below:

Fig 47: SGX’s recent bolt-on acquisitions

Source: Company data

We expect these investments to enable SGX to enhance the value

proposition in its business segments.

Fig 48: Total debt-to-equity ratios of listed exchanges

* end-2019


We believe SGX has a significant runway to add more growth through

acquisitions. Prior to FY20 it had a net cash balance sheet. SGX added

some short-term debt in FY20 to fund its purchase of Scientific Beta that

-10%

10%

30%

50%

70%

90%

110%

130%

150%

Total Debt to Equity



has taken its total debt-to-equity ratio to 24%. This still makes SGX as one

of the lowest geared exchanges amongst peers.

Average peer total debt to equity is 67.5% with a general bias towards

higher debt levels by exchanges weighted towards derivatives trading. In a

scenario where SGX gears up to peer average levels, we estimate the

Group should have an incremental SGD539m available for acquisitions and

investments.

While it is too soon to assess the returns profile of SGX’s recent

investments, we believe they have been executed on plan to leverage on

the mega trends we discuss in Section 1. We think as businesses emerge

from the pandemic, there may be attractive opportunities to invest at

reasonable valuations.

3.3 Blended DCF and Peer PE Target Price We value SGX on a blended target price methodology. We use multi-stage

DCF (WACC of 7.2%, 1% terminal growth) to capture SGX’s long-term value

creation. We give this a 70% weighting to signify the execution of its

multi-asset strategy. We give the remaining 30% to a peer PE basket (at

27x). We use this as a proxy to discount near-term market volatility and

liquidity.

Fig 49: Blended TP methodology Blended Target Price SGD Weighting

Mulit-stage DCF (WACC 7.2%, 1% terminal) 10.50 70%

Peer basket driven TP (27x PE target) 11.40 30%

Blended TP 10.77

PE at TP (2021E) 25.5

PB at TP (2021E) 9.0


3.4 Multi-stage DCF WACC assumptions

Fig 50: WACC Assumptions WACC

Risk Free rate 2.5%

Expected market risk premium 6.5%

Beta 0.85

COE 8.0%

Long term cost of debt 5.0%

Long term debt:equity 20%

FY20E Tax rate 17%

WACC 7.2%

Terminal growth 1.0%




Detailed DCF

Fig 51: Detailed DCF

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

FY21E FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E FY32E FY33E FY34E FY35E Term

Profit before Tax 547 578 612 615 643 530 560 592 626 644 675 708 736 758 780 PBT growth YoY (%) -4% 6% 6% 0% 5% -18% 6% 6% 6% 3% 5% 5% 4% 3% 3% Operating Cashflow 487 523 552 549 577 610 644 680 719 740 776 814 846 871 897 Changes to working

capital (2) 4 4 2 4 4 4 4 4 4 4 4 4 4 4 Capex (40) (40) (40) (40) (40) (40) (40) (40) (40) (20) (20) (20) (20) (20) (20) Free cash flow to firm 445 487 516 511 541 573 608 644 683 724 760 798 830 855 880 14,093

Mid-cycle growth -23% 10% 6% -1% 6% 6% 6% 6% 6% 6% 5% 5% 4% 3% 3% 1%

PV 445 454 449 414 409 404 399 395 390 386 377 370 358 344 331 4,935

Enterprise value 10,859 Net debt (excluding

cash in clearning funds) (382)

Fair value 11,242 Weighted avg. shares

outstanding 1,070 Fair value per share

(SGD) 10.50


Peer PE Basket

Fig 52: Peer PE valuation (x) Stock Ticker Price Mkt Cap 12-mnth PE

(LCY) (SGDm) (x)

ASX ASX AU 81.17 15,876 32.4

TMX X CN 125.40 6,557 21.4

Deutsche Boerse DB1 GY 129.00 38,802 20.2

HKEX 388 HK 380.60 54,922 43.6

Bursa Malaysia BURSA MK 8.60 1,619 20.0

Euronext ENX FP 87.35 7,650 18.6

LSE LSE LN 82.62 48,211 39.0

Nasdaq NDAQ US 127.13 23,776 21.1

CME CME US 168.71 96,481 25.0

Japan Exchange 8697 JT 2,491 13,460 28.6

Average

27.0




4. Detailed Financials

4.1 Detailed Profit & Loss

Fig 53: Detailed P&L


Operating Revenue 712 685 779 818 801 845 910 1,053 1,004 1,094 1,174 Fixed income, Currencies & Commodities 73 77 107 114 107 118 139 171 196 236 280 Equities (Cash) 427 388 388 393 391 393 335 399 322 328 308 Equities (Derivatives) 139 144 203 224 209 235 333 360 349 379 421 Data, Connectivity & Indices 73 77 81 87 93 98 103 122 137 151 166 Operating Expenses (258) (268) (320) (350) (343) (361) (386) (397) (430) (489) (536) Staff Costs (123) (127) (150) (159) (162) (176) (191) (215) (224) (248) (271) Technology (64) (62) (65) (76) (76) (77) (79) (69) (72) (78) (86) Processing & royalties (29) (28) (47) (58) (45) (46) (47) (54) (73) (98) (112) Premises (15) (19) (17) (18) (19) (20) (20) (10) (10) (10) (10) Professional fees (11) (13) (13) (11) (10) (13) (15) (13) (14) (14) (15) Others (17) (20) (28) (28) (31) (30) (34) (36) (38) (40) (42) EBITDA 454 417 458 468 458 483 524 656 574 605 638 Depreciation (40) (45) (56) (59) (56) (59) (63) (90) (33) (34) (35) EBIT 414 372 402 409 402 425 461 566 541 571 603 Other gains/losses (10) 5 8 6 6 11 13 7 8 10 11 Associates and JVs 4 2 2 1 1 1 (2) (2) (2) (2) (2) Profit before tax 408 379 412 416 409 437 473 571 547 578 612 Tax (72) (59) (63) (67) (69) (74) (82) (99) (95) (100) (106) Net profit after tax 336 320 349 349 340 363 391 472 452 478 506 Non-controlling interests - - - - - - - (0) (0) (0) (0) Attributable NPAT 336 320 349 349 340 363 391 472 452 478 506

* From 1Q FY20, SGX changed their revenue reporting segments to FICC, Equities and Data, Connectivity and Indices. MKE has restated historical revenue line items under these headings. These are based on company guidance together with estimates.




4.2 Detailed Balance Sheet

Fig 54: Detailed Balance Sheet


Assets Current assets 1,580 1,389 1,504 1,799 1,613 1,680 1,577 1,716 1,854 2,137 2,421

Cash and cash equivalents 763 757 850 866 796 832 667 907 1,081 1,298 1,524 Cash as per statement of cashflows 613 607 633 598 520 550 446 686 860 1,078 1,303 Cash in clearning funds 150 150 217 268 276 282 221 221 221 221 221 Trade and other receivables 757 572 654 930 815 827 885 758 723 788 846 Financial assets, at FVOCI - - - - - - 25 48 48 48 48 Others 60 60 0 3 1 22 0 2 2 2 2 Non-current assets 215 252 298 307 429 435 555 963 915 921 926 Financial assets, at FVOCI - - - - - - 59 119 119 119 119 Investment property - - - - 26 26 25 24 24 24 24 Property, plant and equipment 24 61 61 62 80 72 61 51 68 71 73 Software 112 112 140 155 159 174 182 168 103 106 109 Right-of-use assets - - - - - - - 87 87 87 87 Intangible assets - - 26 26 64 61 58 108 108 108 108 Goodwill - - 10 10 88 89 85 329 329 329 329 Investments in associated companies 27 27 9 9 10 9 79 72 72 72 72 Others 51 51 51 45 0 4 7 4 4 4 4 Total assets 1,794 1,641 1,802 2,105 2,041 2,115 2,132 2,679 2,770 3,058 3,346 Liabilities

Current liabilities 884 699 805 1,098 973 986 1,001 1,258 1,320 1,489 1,651 Trade and other payables 783 616 718 1,013 892 891 912 809 771 840 902 Borrowings - - - - - - - 304 404 504 604 Lease liabilities - - - - - - - 19 19 19 19 Taxation 92 75 77 75 71 82 77 110 110 110 110 Provisions 7 8 9 10 10 11 12 14 14 14 14 Others 1 - 0 0 0 2 1 2 2 2 2 Non-current liabilities 22 20 21 18 35 33 40 172 172 172 172 Financial liability - - - - - - - 41 41 41 41 Lease liabilities - - - - - - - 70 70 70 70 Deferred tax liabilities 22 20 21 18 35 33 40 62 62 62 62 Net assets 889 922 976 990 1,033 1,096 1,091 1,249 1,277 1,396 1,523 Equity

Share capital 426 428 429 426 428 429 429 430 430 430 430 Treasury shares (20) (14) (12) (13) (13) (11) (13) (21) (21) (21) (21) Reserves 241 246 249 216 218 237 164 180 94 94 94 Retained profits 241 262 311 360 399 441 511 656 769 889 1,015 Non-controlling interests - - - - - - - 4 4 4 4 Total equity 889 922 976 990 1,033 1,096 1,091 1,249 1,277 1,396 1,523




4.3 Detailed Cash Flow

Fig 55: Detailed Cash Flow


Profit before Tax 408 379 412 416 409 437 473 571 547 578 612

Adjustments: (+) Depreciation 40 45 56 59 56 59 63 90 33 34 35

(+) Variable share-based payment 9 11 14 8 9 11 10 15 12 13 14 (-) Share of results from JVs & Associates (4) (2) (2) (1) (1) (1) 2 2 2 2 2

(-) Net interest income 10 (5) (8) (6) (6) (11) (13) (7) (8) (10) (11)

(-) Tax (64) (72) (59) (63) (67) (69) (74) (82) (99) (95) (100)

(+) Others - - - - - - - - - - -

Operating Cashflow 400 356 413 413 399 425 459 588 487 523 552

(+) Changes in working capital - - - - - - - - - - - (increase)/decrease in cash committed to NEMS - - (7) (1) (8) (6) 11 2 - - - Decrease/(increase) in receivables and other assets 23 184 (81) (276) 115 (12) (59) 127 35 (65) (58)

(Decrease)/increase in payables (13) (168) 110 295 (113) 5 10 (105) (37) 69 62

(-) Capex (28) (72) (82) (74) (60) (78) (47) (35) (40) (40) (40)

FCFF 382 301 352 357 334 335 374 578 445 487 516

(+) Net interest income (10) 5 8 6 6 11 13 7 8 10 11 (+) Increase from bank borrowings - - - - - - - 304 100 100 100

(-) Dividends (289) (300) (300) (332) (300) (300) (401) (321) (339) (358) (379)

Other adjustments (19) (13) (35) (65) (117) (17) (90) (327) (41) (21) (22)

Net increase in cash/cash equivalents 65 (6) 26 (35) (78) 29 (104) 241 173 218 226

Cash at the beginning of the year 548 613 607 633 598 520 550 446 686 860 1,078

Cash at the end of the year 613 607 633 598 520 550 446 686 860 1,078 1,303


4.4 MKE vs. Consensus

Fig 56: MKE vs. Consensus

FY21E FY22E FY23E

Total Revenue MKE 1,004 1,094 1,174

Street 1,047 1,075 1,122

Difference (%) -4% 2% 5%

Total PAT MKE 452 478 506

Street 435 442 451

Difference (%) 4% 8% 12%




4.5 Key assumptions

Fig 57: Key assumptions


FICC Fixed income

Revenue from Bond Listing -10% 22% 9% -10% 6% 5% -11% 2% 48% 25% 25% Corporate Actions & Other Revenues 10% 6% 17% 0% -4% 0% -3% 0% -2% 8% 8% Currencies & Commodities

(Derivatives) Trading & clearing 27% 4% 50% 8% -9% 8% 7% 27% 21% 21% 18%

Treasury and Other 17% 2% 20% 17% -2% 24% 62% 22% -5% 21% 18%

Contract Volumes YoY (%) 10% 83% 273% 157% 24% 24% 32% 24% 22% 22% 19%

Equities Equities (Cash) Listing Total listing 25 27 23 18 18 18 16 13 20 20 20

Total delistings 21 35 21 23 29 25 24 39 29 31 31 Total revenue from listing YoY (%) -10% 22% 9% -10% 6% 5% -11% -4% 4% -4% -4% Corporate Actions & others revenue YoY (%) 10% 6% 17% 0% -4% 0% -1% -6% 1% -4% -4%

Trading & clearing Average daily value ADV

(SGDm) 1,461 1,136 1,093 1,097 1,118 1,256 1,042 1,318 1,017 1,069 1,009 Average market velocity (ADV/Avg. Mkt Cap) 41% 29% 27% 29% 29% 31% 26% 37% 30% 30% 28% Settlement & depository management YoY (%) 3% 1% 10% 13% -2% -14% -14% 30% -31% 3% -7% Treasury & other revenue YoY (%) 154% -12% 0% 10% 4% 4% -6% 2% 1% 1% 1%

Equities (Derivatives) Trading and clearning

revenues Equity Derivative Volumes

YoY (%) 34% 0% 50% 6% -14% 19% 19% -3% 10% 8% 11% Average fee per contract - YoY (%) -6% 4% 0% 1% 6% -10% 10% 6% 0% 0% 0% Treasury, license & other YoY (%) 17%

Data, Connectivity & Indices Market data & indices YoY

(%) -6% 7% 4% 5% 4% 6% 2% 38% 20% 15% 15%

Connectivity YoY (%) 3% 3% 7% 9% 10% 5% 6% 5% 5% 5% 5% Operating Expense Assumptions

Staff Costs 16% 3% 19% 6% 2% 8% 9% 12% 4% 11% 9%

Technology YoY (%) -3% -3% 6% 16% 0% 1% 3% -13% 5% 8% 10% Processing & royalties (% of derivatives) 20% 19% 21% 24% 21% 20% 16% 17% 20% 24% 24%

Tax (%) 18% 15% 15% 16% 17% 17% 17% 17% 17% 17% 17%

Total debt to equity 0% 0% 0% 0% 0% 0% 0% 24% 32% 36% 40%

Payout ratio (%) 89% 93% 86% 86% 88% 88% 82% 69% 75% 75% 75%




5. Scenario Analysis

5.1 FY21E EPS sensitivity to YoY Equity derivative volume

growth

Fig 58: Equity derivative growth scenarios Equity Derivatives YoY growth FY21E EPS (SGD) % Change

-5% 0.39 -7%

0% 0.40 -5%

5% 0.41 -2%

10% 0.42 0%

15% 0.43 2%

20% 0.44 5%


5.2 FY21E EPS sensitivity to YoY FX & Commodity derivative

volume growth

Fig 59: FX & Commodity derivative growth scenarios FX & Commods Derivatives YoY growth FY21E EPS (SGD) % Change

-10% 0.39 -7%

0% 0.40 -5%

10% 0.41 -3%

22% 0.42 0%

25% 0.43 1%

35% 0.43 3%


5.3 FY21E EPS sensitivity to ADV

Fig 60: Average Daily Turnover scenarios

FY21E ADV Change from base

(SGDm) FY21E EPS (SGD) % Change

-10% 916 0.40 -4%

-5% 967 0.41 -2%

0% 1017 0.42 0%

5% 1068 0.43 2%

15% 1170 0.45 6%

25% 1272 0.47 11%

30% 1323 0.48 13%

40% 1424 0.49 17%


5.4 FY21E dividend yield sensitivity to payout ratio

Fig 61: Dividend payout sensitivity scenarios Payout Ratio (%) FY21E DPS (SGD) Yield (%)

60% 0.25 2.8%

70% 0.30 3.2%

75% 0.32 3.5%

80% 0.34 3.7%

85% 0.36 3.9%

90% 0.38 4.2%




FYE 30 Jun FY19A FY20A FY21E FY22E FY23E

Key Metrics

P/E (reported) (x) 20.2 19.8 21.6 20.4 19.3

Core P/E (x) 21.7 18.9 21.6 20.4 19.3

Core FD P/E (x) 21.7 19.0 21.7 20.5 19.4

P/BV (x) 7.8 7.2 7.7 7.0 6.4

P/NTA (x) 4.3 4.0 4.2 3.7 3.4

Net dividend yield (%) 3.8 3.7 3.5 3.7 3.9

FCF yield (%) 4.4 6.5 4.6 5.0 5.3

EV/EBITDA (x) 15.3 13.0 16.2 15.2 14.2

EV/EBIT (x) 17.4 15.1 17.2 16.1 15.0

INCOME STATEMENT (SGD m)

Revenue 909.8 1,052.7 1,003.9 1,093.7 1,174.3

Gross profit 909.8 1,052.7 1,003.9 1,093.7 1,174.3

EBITDA 523.5 655.7 573.9 604.8 638.5

Depreciation 0.0 0.0 0.0 0.0 0.0

Amortisation 0.0 0.0 0.0 0.0 0.0

EBIT 461.0 565.8 541.2 570.6 603.1

Net interest income /(exp) 13.5 7.5 8.4 9.8 11.4

Associates & JV (1.5) (2.3) (2.3) (2.3) (2.3)

Exceptionals 0.0 0.0 0.0 0.0 0.0

Other pretax income 0.0 0.0 0.0 0.0 0.0

Pretax profit 473.0 570.9 547.2 578.1 612.2

Income tax (81.9) (99.0) (94.9) (100.2) (106.1)

Minorities 0.0 (0.2) (0.2) (0.2) (0.2)

Discontinued operations 0.0 0.0 0.0 0.0 0.0

Reported net profit 391.1 471.8 452.2 477.8 505.9

Core net profit 391.1 471.8 452.2 477.8 505.9

BALANCE SHEET (SGD m)

Cash & Short Term Investments 445.5 686.4 859.6 1,077.6 1,303.2

Accounts receivable 885.5 758.3 723.2 787.8 845.9

Inventory 0.0 0.0 0.0 0.0 0.0

Reinsurance assets 0.0 0.0 0.0 0.0 0.0

Property, Plant & Equip (net) 243.0 219.0 171.0 176.8 181.4

Intangible assets 142.9 437.5 437.5 437.5 437.5

Investment in Associates & JVs 79.1 72.0 72.0 72.0 72.0

Other assets 336.4 506.3 506.3 506.3 506.3

Total assets 2,132.3 2,679.5 2,769.6 3,058.0 3,346.4

ST interest bearing debt 0.0 304.1 404.1 504.1 604.1

Accounts payable 911.5 808.7 771.2 840.2 902.1

Insurance contract liabilities 0.0 0.0 0.0 0.0 0.0

LT interest bearing debt 0.0 0.0 0.0 0.0 0.0

Other liabilities 130.0 317.0 317.0 317.0 317.0

Total Liabilities 1,041.4 1,430.2 1,492.7 1,661.7 1,823.6

Shareholders Equity 1,090.8 1,244.8 1,272.4 1,391.8 1,518.3

Minority Interest 0.0 4.4 4.4 4.4 4.4

Total shareholder equity 1,090.8 1,249.3 1,276.8 1,396.3 1,522.7

Total liabilities and equity 2,132.3 2,679.5 2,769.6 3,058.0 3,346.4

CASH FLOW (SGD m)

Pretax profit 473.0 570.9 547.2 578.1 612.2

Depreciation & amortisation 62.5 89.9 32.7 34.2 35.4

Adj net interest (income)/exp 0.0 0.0 0.0 0.0 0.0

Change in working capital (37.8) 24.3 (2.3) 4.3 3.9

Cash taxes paid 0.0 0.0 0.0 0.0 0.0

Other operating cash flow (76.1) (72.5) (93.0) (89.2) (95.2)

Cash flow from operations 421.6 612.7 484.7 527.4 556.2

Capex (47.3) (34.6) (40.0) (40.0) (40.0)

Free cash flow 374.3 578.0 444.7 487.4 516.2

Dividends paid (401.4) (321.2) (339.2) (358.3) (379.4)

Equity raised / (purchased) 0.0 0.0 0.0 0.0 0.0

Change in Debt 0.0 304.1 100.0 100.0 100.0

Other invest/financing cash flow (76.9) (320.0) (32.3) (11.1) (11.1)

Effect of exch rate changes 0.0 0.0 0.0 0.0 0.0

Net cash flow (104.1) 240.9 173.2 217.9 225.7



FYE 30 Jun FY19A FY20A FY21E FY22E FY23E

Key Ratios

Growth ratios (%)

Revenue growth 7.7 15.7 (4.6) 8.9 7.4

EBITDA growth 8.3 25.2 (12.5) 5.4 5.6

EBIT growth 8.5 22.7 (4.4) 5.4 5.7

Pretax growth 8.1 20.7 (4.2) 5.6 5.9

Reported net profit growth 7.7 20.6 (4.2) 5.7 5.9

Core net profit growth 7.7 20.6 (4.2) 5.7 5.9

Profitability ratios (%)

EBITDA margin 57.5 62.3 57.2 55.3 54.4

EBIT margin 50.7 53.7 53.9 52.2 51.4

Pretax profit margin 52.0 54.2 54.5 52.9 52.1

Payout ratio 82.1 69.2 75.0 75.0 75.0

DuPont analysis

Net profit margin (%) 43.0 44.8 45.0 43.7 43.1

Revenue/Assets (x) 0.4 0.4 0.4 0.4 0.4

Assets/Equity (x) 2.0 2.2 2.2 2.2 2.2

ROAE (%) 35.8 40.4 35.9 35.9 34.8

ROAA (%) 18.4 19.6 16.6 16.4 15.8

Liquidity & Efficiency

Cash conversion cycle nm nm nm nm nm

Days receivable outstanding 338.8 281.1 265.6 248.7 250.4

Days inventory outstanding nm nm nm nm nm

Days payables outstanding nm nm nm nm nm

Dividend cover (x) 1.2 1.4 1.3 1.3 1.3

Current ratio (x) 1.6 1.4 1.4 1.4 1.5

Leverage & Expense Analysis

Asset/Liability (x) 2.0 1.9 1.9 1.8 1.8

Net gearing (%) (incl perps) net cash net cash net cash net cash net cash

Net gearing (%) (excl. perps) net cash net cash net cash net cash net cash

Net interest cover (x) na na na na na

Debt/EBITDA (x) 0.0 0.5 0.7 0.8 0.9

Capex/revenue (%) 5.2 3.3 4.0 3.7 3.4

Net debt/ (net cash) (445.5) (382.4) (455.5) (573.5) (699.2)

Source: Company; Maybank



Research Offices

ECONOMICS

Suhaimi ILIAS Chief Economist Malaysia | Philippines | Global (603) 2297 8682 [email protected]

CHUA Hak Bin Regional Thematic Macroeconomist (65) 6231 5830 [email protected]

LEE Ju Ye Singapore | Thailand (65) 6231 5844 [email protected]

Linda LIU Singapore | Vietnam (65) 6231 5847 [email protected]

Dr Zamros DZULKAFLI (603) 2082 6818 [email protected]

Ramesh LANKANATHAN (603) 2297 8685 [email protected]

William POH (603) 2297 8683 [email protected]

FX

Saktiandi SUPAAT Head of FX Research (65) 6320 1379 [email protected]

Christopher WONG (65) 6320 1347 [email protected]

TAN Yanxi (65) 6320 1378 [email protected]

Fiona LIM (65) 6320 1374 [email protected]

STRATEGY

Anand PATHMAKANTHAN

ASEAN (603) 2297 8783 [email protected]

FIXED INCOME

Winson PHOON, ACA (65) 6812 8807 [email protected]

SE THO Mun Yi (603) 2074 7606 [email protected]

REGIONAL EQUITIES

Anand PATHMAKANTHAN Head of Regional Equity Research (603) 2297 8783 [email protected]

WONG Chew Hann, CA Head of ASEAN Equity Research (603) 2297 8686 [email protected]

ONG Seng Yeow Research, Technology & Innovation (65) 6231 5839 [email protected]

MALAYSIA

Anand PATHMAKANTHAN Head of Research (603) 2297 8783 [email protected] • Strategy

Desmond CH’NG, BFP, FCA (603) 2297 8680 [email protected] • Banking & Finance

LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas Services- Regional • Automotive

ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional

YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media • Aviation

TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos

WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property

LEE Yen Ling (603) 2297 8691 [email protected] • Glove • Ports • Shipping • Healthcare • Petrochemicals

Kevin WONG (603) 2082 6824 [email protected] • REITs • Technology

Jade TAM (603) 2297 8687 [email protected] • Consumer Staples & Discretionary

TEE Sze Chiah Head of Retail Research (603) 2082 6858 [email protected]

Nik Ihsan RAJA ABDULLAH, MSTA, CFTe (603) 2297 8694 [email protected] • Chartist

Amirah AZMI (603) 2082 8769 [email protected] • Retail Research

SINGAPORE

Thilan WICKRAMASINGHE Head of Research (65) 6231 5840 [email protected] • Banking & Finance - Regional • Consumer

CHUA Su Tye (65) 6231 5842 [email protected] • REITs - Regional

LAI Gene Lih, CFA (65) 6231 5832 [email protected] • Technology • Healthcare

Kareen CHAN (65) 6231 5926 [email protected] • Transport

TAN Chin Poh Head of Retail Research (65) 6231 5928 [email protected]

Eric ONG (65) 6231 5924 [email protected] • Retail Research

Matthew SHIM (65) 6231 5929 [email protected] • Retail Research

INDIA

Jigar SHAH Head of Research (91) 22 4223 2632 [email protected] • Strategy • Oil & Gas • Automobile • Cement

Neerav DALAL (91) 22 4223 2606 [email protected] • Software Technology • Telcos

Kshitiz PRASAD (91) 22 4223 2607 [email protected] • Banks

Vikram RAMALINGAM (91) 22 4223 2607 [email protected] • Automobile • Media

INDONESIA

Isnaputra ISKANDAR Head of Research (62) 21 8066 8680 [email protected] • Strategy • Metals & Mining • Cement • Autos • Consumer • Utility

Rahmi MARINA (62) 21 8066 8689 [email protected] • Banking & Finance

Aurellia SETIABUDI (62) 21 8066 8691 [email protected] • Property

Willy GOUTAMA (62) 21 8066 8500 [email protected]

• Consumer

PHILIPPINES

Jacqui De JESUS (63) 2 8849 8844 [email protected] • Strategy • Conglomerates

Romel LIBO-ON (63) 2 8849 8844 [email protected] • Property

Fredrick De GUZMAN (63) 2 8849 8847 [email protected] • Consumer

Bernadine B BAUTISTA (63) 2 8849 8847 [email protected] • Utilities

Rachelleen RODRIGUEZ (63) 2 8849 8843 [email protected] • Banking & Finance

THAILAND

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Strategy • Consumer • Materials • Services

Jesada TECHAHUSDIN, CFA (66) 2658 6300 ext 1395 [email protected] • Banking & Finance

Kaushal LADHA, CFA (66) 2658 6300 ext 1392 [email protected] • Oil & Gas – Regional • Petrochemicals - Regional

Vanida GEISLER, CPA (66) 2658 6300 ext 1394 [email protected] • Property

Yuwanee PROMMAPORN (66) 2658 6300 ext 1393 Yuwanee.P @maybank-ke.co.th • Services

Ekachai TARAPORNTIP Head of Retail Research (66) 2658 5000 ext 1530 [email protected]

Surachai PRAMUALCHAROENKIT (66) 2658 5000 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel

Suttatip PEERASUB (66) 2658 5000 ext 1430 [email protected] • Food & Beverage • Commerce

Jaroonpan WATTANAWONG (66) 2658 5000 ext 1404 [email protected] • Transportation • Small cap

Thanatphat SUKSRICHAVALIT (66) 2658 5000 ext 1401 [email protected] • Media • Electronics

Wijit ARAYAPISIT (66) 2658 5000 ext 1450 [email protected] • Strategist

Theerasate PROMPONG (66) 2658 5000 ext 1400 [email protected] • Equity Portfolio Strategist

Apiwat TAVESIRIVATE (66) 2658 5000 ext 1310 [email protected] • Chartist and TFEX

VIETNAM

Quan Trong Thanh (84 28) 44 555 888 ext 8184

[email protected] • Banks

Hoang Huy, CFA (84 28) 44 555 888 ext 8181 [email protected] • Strategy

Le Nguyen Nhat Chuyen (84 28) 44 555 888 ext 8082 [email protected] • Oil & Gas

Nguyen Thi Sony Tra Mi (84 28) 44 555 888 ext 8084 [email protected] • Consumer

Tyler Manh Dung Nguyen (84 28) 44 555 888 ext 8180 [email protected] • Utilities • Property

Nguyen Thi Ngan Tuyen Head of Retail Research (84 28) 44 555 888 ext 8081 [email protected] • Food & Beverage • Oil & Gas • Banking

Nguyen Thanh Lam (84 28) 44 555 888 ext 8086 [email protected] • Technical Analysis



APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to s ell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ fr om fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies d iscussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives” ) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solic it business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report to the extent permitted by law.

This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.

This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categor ies of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this repor t.

Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

Thailand Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of Maybank Kim Eng Securities (Thailand) Public Company Limited. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) accepts no liability whatsoever for the actions of third parties in this respect.

Due to different characteristics, objectives and strategies of institutional and retail investors, the research products of MBKET Institutional and Retail Research departments may differ in either recommendation or target price, or both. MBKET reserves the rights to disseminate MBKET Retail Research reports to institutional investors who have requested to receive it. If you are an authorised recipient, you hereby tacitly acknowledge that the research reports from MBKET Retail Research are first pr oduced in Thai and there is a time lag in the release of the translated English version.

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. MBKET does not confirm nor certify the accuracy of such survey result.

The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the Securities and Exchange Commission. Thaipat Institute made this asse ssment based on the information received from the listed company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company. The assessment result is therefore made from the perspective o f Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, MBKET does not confirm, verify, or certify the accuracy and completeness of the assessment result.

US This third-party research report is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). A ll responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security mentioned within must do so with: Maybank Kim Eng Securities USA Inc. 400 Park Avenue, 11th Floor, New York, New York 10022, 1-(212) 688-8886 and not with, the issuer of this report.



Disclosure of Interest

Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to he rein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Singapore: As of 16 November 2020, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report. Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: As of 16 November 2020, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report. India: As of 16 November 2020, and at the end of the month immediately preceding the date of publication of the research report, KESI, authoring analyst o r their associate / relative does not hold any financial interest or any actual or beneficial ownership in any shares or having any conflict of interest in the subject companies except as otherwise disclosed in the research report.

In the past twelve months KESI and authoring analyst or their associate did not receive any compensation or other benefits fr om the subject companies or third party in connection with the research report on any account what so ever except as otherwise disclosed in the research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Conduct Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility fo r its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that f or accurate guidance recipients should consult with their own independent tax advisers.

DISCLOSURES

Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938- H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This report is distributed in Singapore by Maybank KERPL (Co. Reg No 198700034E) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Maybank Kim Eng Securities (“PTMKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the Financial Services Authority (Indonesia). Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities Limited (License Number: 117/GP-UBCK) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited and the Bombay Stock Exchange and is regulated by Securities and Exchange Board of India (“SEBI”) (Reg. No. INZ000010538). KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) and as Research Analyst (Reg No: INH000000057) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Conduct Authority.



Historical recommendations and target price: Singapore Exchange Ltd (SGX SP)

Definition of Ratings

Maybank Kim Eng Research uses the following rating system

BUY Return is expected to be above 10% in the next 12 months (including dividends)

HOLD Return is expected to be between 0% to 10% in the next 12 months (including dividends)

SELL Return is expected to be below 0% in the next 12 months (including dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

7.0

7.7

8.4

9.1

9.8

10.5

May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20


13 May Buy : SGD8.8



Malaysia Maybank Investment Bank Berhad

(A Participating Organisation of

Bursa Malaysia Securities Berhad)

33rd Floor, Menara Maybank,

100 Jalan Tun Perak,

50050 Kuala Lumpur

Tel: (603) 2059 1888;

Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd

Maybank Kim Eng Research Pte Ltd

50 North Canal Road

Singapore 059304

Tel: (65) 6336 9090

London Maybank Kim Eng Securities

(London) Ltd

PNB House

77 Queen Victoria Street

London EC4V 4AY, UK

Tel: (44) 20 7332 0221

Fax: (44) 20 7332 0302

New York Maybank Kim Eng Securities USA

Inc

400 Park Avenue, 11th Floor

New York, New York 10022,

U.S.A.

Tel: (212) 688 8886

Fax: (212) 688 3500

Stockbroking Business:

Level 8, Tower C, Dataran Maybank,

No.1, Jalan Maarof

59000 Kuala Lumpur

Tel: (603) 2297 8888

Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd

28/F, Lee Garden Three,

1 Sunning Road, Causeway Bay,

Hong Kong

Tel: (852) 2268 0800

Fax: (852) 2877 0104

Indonesia PT Maybank Kim Eng Securities

Sentral Senayan III, 22nd Floor

Jl. Asia Afrika No. 8

Gelora Bung Karno, Senayan

Jakarta 10270, Indonesia

Tel: (62) 21 2557 1188

Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd

1101, 11th floor, A Wing, Kanakia

Wall Street, Chakala, Andheri -

Kurla Road, Andheri East,

Mumbai City - 400 093, India

Tel: (91) 22 6623 2600

Fax: (91) 22 6623 2604

Philippines Maybank ATR Kim Eng Securities Inc.

17/F, Tower One & Exchange Plaza

Ayala Triangle, Ayala Avenue

Makati City, Philippines 1200

Tel: (63) 2 8849 8888

Fax: (63) 2 8848 5738

Thailand Maybank Kim Eng Securities

(Thailand) Public Company Limited

999/9 The Offices at Central World,

20th - 21st Floor,

Rama 1 Road Pathumwan,

Bangkok 10330, Thailand

Tel: (66) 2 658 6817 (sales)

Tel: (66) 2 658 6801 (research)

Vietnam Maybank Kim Eng Securities Limited

4A-15+16 Floor Vincom Center Dong

Khoi, 72 Le Thanh Ton St. District 1

Ho Chi Minh City, Vietnam

Tel : (84) 844 555 888

Fax : (84) 8 38 271 030

Saudi Arabia In association with

Anfaal Capital

Ground Floor, KANOO Building

No.1 - Al-Faisaliyah,Madina Road,

P.O.Box 126575 Jeddah 21352

Kingdom of Saudi Arabia

Tel: (966) 920023423

South Asia Sales Trading Kevin Foy

Regional Head Sales Trading

[email protected]

Tel: (65) 6636-3620

US Toll Free: 1-866-406-7447

North Asia Sales Trading Andrew Lee

[email protected]

Tel: (852) 2268 0283

US Toll Free: 1 877 837 7635

Indonesia Iwan Atmadjaja [email protected] (62) 21 8066 8555

London Greg Smith [email protected] Tel: (44) 207-332-0221

New York James Lynch [email protected] Tel: (212) 688 8886

India Sanjay Makhija [email protected] Tel: (91)-22-6623-2629

Philippines Keith Roy [email protected] Tel: (63) 2 848-5288

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