Is It Too Late to Buy SGX?

Core Viewpoint - Singapore Exchange Limited (SGX) has experienced a significant share price increase of approximately 43% over the past year, driven by strong fundamentals, increased trading volumes, new IPOs, and supportive policies [1][3]. Group 1: Business Fundamentals - SGX operates as Singapore's sole approved and regulated stock exchange, creating a natural monopoly that allows for robust cash flow generation with minimal capital expenditure [2]. - The exchange has a solid dividend track record, having paid annual dividends since 2003, which has historically rewarded long-term shareholders with dependable dividends and capital appreciation [5][6]. - SGX's recent annual dividend for 2025 is S$0.375 per share, with a payout ratio of 61.9%, supported by a healthy free cash flow of S$773.6 million for FY2025 [6]. Group 2: Recent Developments - Recent market fluctuations have led to increased trading and derivatives volumes, alongside positive policy initiatives and market reforms that have heightened interest in Singapore's markets [3][4]. - SGX is diversifying its offerings, including data, derivatives, and fixed income, which reduces reliance on equity trading and supports revenue growth [5][7]. Group 3: Investment Considerations - Despite the positive outlook, SGX's current forward price-to-earnings (P/E) ratio stands at 27.6 times, which is elevated compared to its 10-year historical average of 21.9 times, indicating stretched valuations [8]. - Long-term investors should focus on underlying fundamentals rather than short-term price movements, with current trailing annual yield at 2.1%, below the 10-year average of 3.44% [9][10]. - A dollar-cost-averaging (DCA) strategy may be prudent for investors to mitigate the risk of buying at a premium while ensuring consistent dividend income [11].