Singapore Exchange "When expensive gets more expensive" (Neutral) Rawat

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Singapore Exchange "When expensive gets more expensive" (Neutral) Rawat

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UBS Research THESIS MAP Thesisa guideMapto our thinking and what´s where in this report

Pivotal Questions Q: Will the equites market reforms drive a structural re-rating for SGX?

Likely yes. SGX is trading at valuation levels that would historically have appeared difficult to justify.

However, we believe the market is increasingly assigning SGX a lower equity risk premium, reflecting

growing confidence in Singapore's equity market reforms and their potential to drive a more vibrant

domestic capital market over time. While the direct impact of the S$6.5bn capital injection is modest

relative to the overall market capitalisation of Singapore equities, the reforms have already coincided

with materially higher trading activity and stronger earnings expectations. More importantly,

investors appear willing to look beyond near-term earnings and capitalise SGX on a structurally

higher valuation framework. We forecast c.10% EPS CAGR over FY27-29E and believe current

valuations could be sustained provided confidence in the reform agenda remains intact.

Q: Will dividend payout ratio return to >65% over the medium term?

Probably yes. SGX revised its dividend framework in August 2025 and is guiding for DPS increases of

0.25 cents per quarter annually from FY26-28. This implies DPS growth of 19% in FY26, 9% in FY27

and 8% in FY28. On our estimates, payout ratios increase from 62% in FY25 to around 69% in

FY26E and remain sustainably in the mid-to-high 60% range thereafter. Continued earnings growth

from both the securities and derivatives franchises should allow SGX to fund higher dividends while

retaining balance sheet flexibility.