Is DBS worth S$23 a share?
Analysts envision a 12% upside on the DBS Group stock in the next 12 months.
Why did DBS shares fall this week?
DBS Group (SGX: D05) shares opened lower on Wednesday 09 September, following a third straight day of US market sell-offs led by major tech names like Tesla and Apple.
Negative Covid-19 vaccine updates, in which supposed frontrunner AstraZeneca had to pause several large late-stage trials of its experimental coronavirus vaccine due to an unexplained illness in one study participant, also dealt a blow to equity prices globally.
As at 15:10 SGT on Wednesday 09 September 2020, DBS shares are trading at S$20.46 each on the IG platform.
DBS share price prediction: What’s the latest?
Across the board, DBS Group has received a consensus rating of ‘buy’ from 12 out of 20 analysts polled by Bloomberg as of 09 September 2020.
The stock also has a consensus 12-month target price of S$22.96, which represents a 12.2% upside from the last traded price of S$20.46.
UOB analyst Jonathan Koh recently reiterated a target price of S$22.90 and ‘buy’ call on the stock.
He wrote that the bank surpassed expectations in 2020’s second quarter ‘with a vast improvement in CASA (current accounts and savings accounts) ratio and continued expansion of AUM (assets under management)’.
It also has unrealised mark-to-market (MTM) gains of S$1.5 billion in its book to provide a cushion against lower net interest margins in the second half of 2020, Koh added.
On the other hand, CIMB has a ‘hold’ rating on DBS, alongside a lower target price of S$20.46 a share – on par with current prices.
The analysts wrote that while they are optimistic on a pick-up in credit growth across all three banks as GDP recovers, the end of debt moratoriums could potentially ‘deepen asset quality pressures’.
Ready to buy (long) or sell (short) DBS shares?
How does DBS’ dividend estimates compare to OCBC and UOB?
For DBS shareholders, another key point of interest is the expected dividend pay-out over the next two financial years.
As we noted in a recent article ‘Singapore bank dividends: What’s the outlook?’, DBS saw the largest decline in interim dividends among the three Singapore banks in the first half of 2020.
The group proposed a half-year dividend amount of S$0.18 per share, 40% below the amount of S$0.30 paid a year prior.
Under MAS’ new guidelines for dividends per share (DPS) to be capped at 60% of 2019’s total sum, the maximum DPS that DBS can declare for FY2020 would be S$0.738, against FY 2019’s total DPS of S$1.23.
This would equate to a maximum dividend yield of 3.61% for this financial year, based on the bank’s latest share price.
They have their ‘hopes up for a recovery’ in DBS’ full-year dividends for FY2021, as the bank was already confident of sustaining its DPS amount prior to MAS’ directive.
Looking further ahead, JP Morgan wrote that the ‘dividend outcome is reasonably opaque’ across Singapore’s three main banks.
They hypothesised that DBS, OCBC and UOB will continue to pay the current MAS mandated dividends until the end of 2021, with banks focused on earnings sustainability rather than the interests of shareholders.
How to trade Singapore stocks with IG
Are you feeling bullish or bearish on DBS Group Holdings and other Singapore stocks?
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Live prices on most popular markets