Why Maybank raised DBS target by 21%
Maybank analysts also raised their rating on the stock to ‘buy’, in anticipation of stronger market liquidity and further stimulus.
- DBS Group (SGX: D05) share price is up over 3% year-to-date
- The money lender is scheduled to publish its full year financial results for 2020 on Wednesday (10 February)
- Maybank analysts recently raised their price targets by 21%
- Meanwhile, UOB were more bearish, reducing their rating to ‘hold’
- Trade DBS Group, long or short, with an IG account today
DBS Group Holdings is due to report its fourth quarter and full year financial results for 2020 before trading begins on Wednesday (10 February 2021).
In this article, we highlight a few things investors should note ahead of the report.
1. Net profit fell 20% in Q3 2020
Singapore’s largest money lender saw its Q3 net profit fall 20% to S$1.3 billion from S$1.63 billion in the same quarter a year earlier.
The decline came on the back higher allowances for potential bad loans and lower net interest income, the bank said.
The board had declared an interim dividend of S$0.18 a share, a drop of 40% from the S$0.30 paid out a year prior, to which the bank’s scrip dividend scheme will be applied.
Third-quarter net interest income declined 12% year-on-year to S$2.17 billion.
Net interest margin fell over nineteen basis points from the same quarter in 2019 to 1.53% as the impact of global interest rate cuts in March and April 2020 were more fully felt. Loans were also stable in constant currency terms at S$371 billion.
CEO Piyush Gupta said that the results ‘reflect a recovery in business momentum as regional economies emerge from lockdowns’.
2. DBS Group’s share price up 3.12% in 2021
DBS Group’s share price is up 3.12% since the start of the year. Stocks spiked up nearly 9% between 06 January 2020 and 08 January 2020 alone to a year-to-date peak of S$27.42 a share.
Maybank analysts on 26 January 2021 raised their target prices on DBS Group to S$29.78, up 21% from their previous target of S$24.63.
They also raised their rating to ‘buy’ from sell’ previously, citing stronger market liquidity and expectations for more stimulus buoyed by continued economic relaxing.
Meanwhile, UOB brokers were more pessimistic on the stock, lowering their target price by 6.45% to S$29.45 from S$31.48 previously.
They also dropped their recommendation to a ‘hold’ call, due to legal concerns for DBS India regarding the lack of sufficient notice being given to its amalgamation partner Lakshmi Vilas Bank’s (LVB) shareholders.
The analysts added that they ‘no longer ascribe a premium to our valuation of DBS’. ‘We have conservatively reduced BVPS by S$614 million for non-performing loans carried on LVB’s balance sheet and S$142 million for the potential compensation to existing LVB shareholders.
Assuming the Monetary Authority of Singapore also does not interfere with banks’ dividend policies, UOB expects DBS to provide dividends per share of S$1.08 for 2021 and S$1.32 for 2022, which represents dividend yields of 4.1% and 5.0% respectively.
Across the board, the stock has an average 12-month target price of S$27 per share and rating of ‘outperform’, according to data from SGX StockFacts.
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