Highlights

• SGX’s FY26 core net profit of S$759.5m (+24.6% yoy) came in slightly above our expectations, driven by tight cost control and lower associate losses. SGX saw upbeat trading activities across all business segments.
   
• Upbeat FY27 outlook: The cash equity business is expected to be bolstered by various initiatives such as the EQDP, and the derivative business would be driven by risk management demand amid macro/geopolitical uncertainties. 
   
• However, positives are likely priced in. Maintain HOLD; target price: S$23.40.
   

Analysis

• FY26 core earnings slightly above expectations. Singapore Exchange’s (SGX) FY26 reported net profit of S$698.4m (+7.8% yoy) was impacted by several one-off items such as impairment losses and investment gains. Excluding these one-off items, core net profit of S$759.5m (+24.6% yoy) slightly beat our estimate by 2.8%. The beat was mainly due to: a) slightly better-than-expected cost control, and b) yoy lower loss contribution from associates. Net revenue (ie excluding transaction-based expenses) rose 13.9% yoy to S$1.48b, driven by growths in: a) fixed income, currencies and commodities (FICC, +17.0% yoy); b) cash equities (+28.1% yoy); and c) platform and other services (+7.0% yoy) segments, but partly offset by a marginal decline in the equity derivatives business (-0.4%). 

• Disciplined cost management. SGX’s adjusted operated expenses (ie excluding one-off items) rose 5.5% yoy in FY26, slower than the revenue growth of 13.9%, demonstrating the group’s disciplined cost management. As a result, SGX’s core operating profit jumped 19.9% yoy, with its core operating margin improving 3.1ppt yoy to 61.3%.
   
• Strong trading volume across major products. For cash equity, securities daily average value (SDAV) expanded 34.9% yoy to S$1.8b (FY25: S$1.3b), reflecting stronger investor interest and increased investment flows, with total securities traded value rising 35.5% to S$456b in FY26. For FICC, total contract volume rose 26.0% to 176.5m, driven by strong growth in currency (+30.8% yoy), iron ore (+22.4% yoy), and freight (+19.6% yoy) derivatives. For the equity derivative business, contract volume rose 6.4% yoy in FY26, to 187.0m, as trading activities for FTSE China A50, GIFT Nifty 50, FTSE Taiwan and MSCI Singapore index futures contracts all picked up in 2HFY26.
   
• Declared final dividend of 11.5 S cents plus one-off additional dividend of 12.5 S cents. The 11.5 cents final dividend was in line with the company’s guided policy. In addition, SGX declared another one-time additional dividend of 12.5 S cents out of its capital recycling gains. All in, 4QFY26 dividends amount to 24.0 S cents, bringing total FY26 dividends to 57.0 S cents, or an 87% payout ratio. 
   
• Upbeat outlook guidance. We remain constructive on SGX's outlook and expect broad-based growth across both its equities and derivatives businesses. On the cash equity side, improving market liquidity, a strong IPO pipeline (with about 50 deals across various stages) and continued support from the Equity Market Development Programme (EQDP) should underpin higher securities trading activity, while ongoing market structure reforms and initiatives such as the Global Listing Board are expected to strengthen Singapore's capital market ecosystem over the medium term.
   
• On the derivatives side, structural growth remains intact, supported by rising global adoption of SGX's forex and commodity derivatives, increasing T+1 trading volumes and continued product innovation. We also expect new initiatives, including gold-related products, expansion of the OTC clearing franchise and strategic index partnerships, to provide additional growth avenues. Overall, management remains confident of delivering its medium-term guidance of 6-8% revenue growth (excluding treasury income) while maintaining disciplined cost management and shareholder returns.
   
• Management guides for SGX’s operating expenses to grow by 6-8% in FY27; this is slower than our 11.8% revenue growth projection for FY27.