Analysts are unanimous in their optimism on DBS Group, following record earnings in 1HFY2021 and the lifting of the Monetary Authority of Singapore’s dividend cap.
Lower credit costs and operating expenses helped DBS Group beat estimates in 2QFY2021, write CGS-CIMB Research analysts Andrea Choong and Lim Siew Khee. “The beat was primarily due to a $85 million writeback of general provisions (GP), resulting in total impairments of only $79 million in 2QFY2021”
In an Aug 5 note, Choong and Lim are maintaining “add” on DBS Group, with an unchanged target price of $32.64, which represents a 6.7% upside.
See: DBS sees record earnings of $3.71 bil for 1H21; interim dividend of 33 cents declared
On a quarter-on-quarter basis, earnings for the 2QFY2021 fell 15% compared to the $2.0 billion in earnings posted in the 1QFY2021.
The bank’s earnings for the 1HFY2021 stood at a record $3.71 billion, with the two highest quarters on record. The figure represents a 54% growth from the earnings of $2.41 billion posted in the 1HFY2020.
DBS declared interim dividend per share (DPS) of S$0.33 for 2QFY2021. “We project $1.08 for the full year of FY2021F,” says Choong and Lim.
PhillipCapital Research analyst Terence Chua says DBS Group is “emerging stronger”, with 2QFY2021 earnings 10.7% above his forecast.
In an Aug 6 note, Chua is maintaining “accumulate” with a raised target price of $32 from $31.40 previously.
Despite economic uncertainties from Singapore’s return to Phase 2 (Heightened Alert), loans and transaction pipelines are expected to be strong, writes Chua. “We lower allowance estimates for FY2021F. Consequently, our earnings for FY2021F rise by 6.7%.”
“DBS is accelerating new initiatives as it faces interest-rate headwinds. New initiatives such as the DBS Digital Exchange, Partior, Climate Impact X and China Securities joint venture are expected to bring in revenue of $350 million in FY2022F, up from $150 million in FY2021F.”
OCBC Investment Research analysts note that DBS Group’s balance sheet remains strong, and the interim DPS has been returned to pre-pandemic levels following the lifting of restrictions by MAS.
Common equity tier-1 (CET-1) ratio rose 0.2% to 14.5%, with leverage ratio of 6.8% more than double the regulatory minimum required. “Looking ahead, management is on the lookout for potential bolt-on M&A opportunities which may come up.”
In an Aug 5 note, OCBC Investment Research is recommending “buy” with a raised target price of $34.00.
With its new initiatives, DBS Group’s environmental, social and governance (ESG) performance is above average among global peers, notes OCBC Investment Research. “DBS’s subsidiary has become a signatory to the Equity Principles in November 2019 and has robust corporate governance practices as well as financial inclusion initiatives that involves underbanked segments and small medium enterprises, which is driven by a clear digitalisation strategy.”
Resilient operating conditions are set to continue, says Maybank Kim Eng Research analyst Thilan Wickramasinghe, offering relatively lower risk growth visibility for DBS Group.
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In an Aug 5 note, Wickramasinghe is maintaining “buy” with a raised target price of $35.11, from $33.71.
“Going forward, we expect momentum to turn positive supported by loan growth and fees. DBS is geared towards larger corporates in Singapore and North Asia, where disruptions from COVID are limited and growth from economic re-opening is in a better footing. Management is guiding high single digit loan growth in 2021F and expect momentum to remain supported in 2022F particularly from large corporate and mortgage demand,” writes Wickramasinghe.
DBS Group's recovery is "well-entrenched", writes RHB Group Research in an Aug 6 note, maintaining "buy" with a target price of $35.50, the highest target price among analysts mentioned here.
As at 3.55pm, shares in DBS Group are trading 24 cents higher, or 0.78% up, at $31.04; or 1.1 times price-to-book value (P/B), according to PhillipCapital Research’s estimates.
Photo: Bloomberg
