Is SGX overpaying The Baltic Exchange?

The price is thrice The Baltic Exchange’s book value.

Singapore Exchange offered to buy The Baltic Exchange at a steep price of around $137m (GBP77.6m) cash, almost thrice the book value of GBP25.95m for the shipping market information source, analysts said.

“On a PE basis, it seems rather expensive as it works out to more than 50x FY15 earnings, as against SGX’s 23x FY16 and 21x FY17F earnings,” DBS Group Research said.

The purchase would boost The Baltic Exchange’s total valuation to about GBP86.7m. DBS Group Research believes, however, that it’s contribution to SGX would be minimal, as The Baltic Exchange posted a net profit of GBP1.34m on revenue of GBP6.03m for FYMar 15 compared to SGX’s net profit of S$349m for FY Jun16. SGX has cash of about S$866.3m as at 30 Jun 16.

SGX is keen on getting its hands on The Baltic Exchange as it would boost its plans to diversify revenue streams from the sluggish Securities market. It would also slacken SGX’s reliance on the derivatives market, DBS Group Research explained.