Why Singapore Exchange (SGX:S68) is a Compelling Growth and Value Play in 2025

The Singapore Exchange (SGX:S68) has emerged as a standout player in Asia's capital markets, driven by a combination of strong earnings momentum, margin expansion, and strategic initiatives to solidify its position. For investors seeking a blend of growth and value, SGX offers a compelling opportunity. Let's unpack the numbers and strategies behind this thesis.

1. EPS Growth: A Steady Climb to New Heights

SGX's earnings per share (EPS) have been on a clear upward trajectory. In the first half of 2025, diluted EPS hit S$0.32, a 23% year-over-year increase from S$0.26 in the same period of 2024. This outpaces its historical averages, with a 19.7% annualized EPS growth rate over the past 12 months, compared to a slower 5.4% average over three years. The acceleration reflects a strategic shift toward operational efficiency and revenue diversification.

The EPS surge is underpinned by a 15% revenue increase to S$682.2 million in 1H 2025, driven by strong performance in derivatives, equities, and data services. Notably, adjusted EPS (excluding non-recurring items) rose to S$0.299, a 27% jump from the prior year, signaling robust underlying profitability.

2. Margin Expansion: A Testament to Operational Discipline

SGX's profit margins have also improved markedly. The net margin expanded to 50% in 1H 2025, up from 48% in the prior year, as revenue growth outpaced expenses. This margin expansion is critical, as it suggests the company can scale profitably even in a slowing regional economy.

The margin gains stem from cost controls and higher revenue contributions from high-margin segments like derivatives trading and data analytics. SGX's focus on streamlining operations—such as consolidating regulatory oversight under its SGX RegCo unit—has reduced administrative burdens, allowing capital to flow to growth areas.

3. Strategic Initiatives: Fueling Future Growth

SGX is not resting on its laurels. In early 2025, it announced a series of measures to bolster its ecosystem:

• The S$5 Billion Equity Market Development Programme (EQDP): Targets increased liquidity by incentivizing fund managers to invest in Singapore-listed equities. Combined with tax exemptions for fund managers, this aims to attract S$5 billion in new capital.
• Tax Incentives for Listings: New primary listings receive a 20% corporate tax rebate (capped at S$6 million annually), while secondary listings get 10%. These rebates are designed to attract quality companies to SGX.
• Regulatory Overhaul: Simplifying listing processes to reduce timelines to 6–8 weeks and adopting a disclosure-based regime to reduce bureaucratic hurdles.

These initiatives address key pain points: liquidity gaps in smaller-cap stocks, regulatory complexity for issuers, and competition from rival exchanges like Hong Kong and Tokyo.

4. Investment Case: A Value Play with Growth Legs

SGX's current valuation appears reasonable. While its stock price rose 14% week-over-week in early 2025, six valuation metrics suggest potential headwinds, possibly reflecting investor caution. However, the fundamentals argue for optimism:

• Valuation Metrics: At a trailing P/E of around 15x (based on 1H 2025 EPS), SGX trades at a discount to its historical average of ~18x.
• Dividend Yield: The interim dividend rose to 9.0 cents per share, a 5% increase year-over-year, signaling confidence in cash flows.

The strategic initiatives, if successful, could lift revenue growth closer to the 7.9% industry average for Asian capital markets. Analysts currently project 5.1% annual revenue growth over the next three years—a conservative estimate that could be exceeded as SGX captures market share.

5. Risks to Consider

• Regional Competitiveness: Rival exchanges like HKEX and Eurex are also expanding, and SGX's success hinges on execution of its new programs.
• Market Volatility: A slowdown in global equities trading could crimp revenue, though SGX's diversified product mix (derivatives, data, and listings) offers some insulation.

Conclusion: A Buy with a Long-Term Horizon

SGX's combination of strong EPS growth, improved margins, and strategic initiatives positions it as a compelling investment. While valuation metrics suggest caution, the company's fundamentals and growth catalysts argue for a buy rating, particularly for investors with a 3–5 year horizon.

Investors should monitor execution of the EQDP and tax incentives, as well as listing activity in 2025. With a disciplined strategy and a key role in Asia's financial ecosystem, SGX is primed to capitalize on the region's growth—and reward patient investors.