SINGAPORE (June 20): RHB is keeping its “buy” recommendation on Singapore Exchange (SGX) with a target price of S$9.00, supported by the broker’s DCF-derived fair value of S$8.79 and a 4.1% dividend yield.

In a Tuesday report, analyst Leng Seng Choon believes strengthening global growth will be positive for Singapore’s economic growth, and this would drive FY18F securities average daily volume (SADV) to S$1.35 billion despite a “relatively unexciting” QTD SADV in 4QFY17 of S$1.15 billion.

Leng is also forecasting FY18 net profit growth of 12% from both the exchange’s securities and derivatives businesses.

SGX announced on Monday that it was teaming up with ETPL and signing a two-year MOU to help startups and SMEs tap innovative technologies and capital markets more efficiently.

Leng says, “Though the impact would flow-through in the longer term, we see this as SGX’s continued strive to drive its revenue.”

(See also: Singapore Exchange teaming up with A*STAR unit to help firms access R&D capabilities and capital markets)

The analyst is also hopeful of a surge in the China A50 Index Futures’ trading volume. Although there has not been any significant volume pick-up thus far, he believes upside potential remains.

In April and May, total derivatives trading volume was 28.3 million in April and May 2017 with nearly 40% of the volume came from the China A50 Index Futures.

“We have forecasted FY17 derivatives average daily contract (DADC) of 683,000, which is close to FY17’s 11-month DADC of 671,000. We are forecasting FY18 DADC of 794,000, with across-the-board growth, particularly from the China A50 Index Futures,” says Leng.

Share in SGX are trading 2 Singapore cents higher at S$7.36 on Tuesday.