Valuation
To arrive at our one-year price target for SGJ, a Residual Income model, combined with a market-based approach with key assumptions including a cost of equity of 10.9% was used. Other key assumptions include an adjustment for clean surplus accounting for the residual income model and SGJ sustaining an average return on equity in the mid-teens over the explicit five-year forecast period, underpinned by anticipated growth in the company’s loan portfolio and managed assets. Additionally, we project that SGJ will continue to exhibit robust operational efficiency, maintaining its cost-to-income ratio just below 50% over the forecast horizon. Furthermore, we applied the stock’s P/E ratio of 7.70x as at April 11, 2025, to our one-year forward estimate of EPS of $8.13, effectively allowing for the possibility that market sentiment remains subdued. Accordingly, we arrived at a composite 1-year forward price target for the stock of $78.32. The price target represents an upside of 48.99% relative to the close price of $52.57 (as of April 11, 2025) and a total return of 52.13% after considering SGJ’s dividend yield. As a result, we have assigned an OVERWEIGHT recommendation to SGJ.
| Last Closing | J$52.57 |
| 52 Week High | J$63.99 |
| 52 Week Low | J$41.00 |
| YTD Return | -1.85% |
| Trailing P/B | 1.16x |
| Trailing P/E | 7.70x |
| Target Price | J$78.32 |
| Upside Potential | 48.99% |
| Recommendation | OVERWEIGHT |
Date: April 11, 2025
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