DBS Group Holdings

Price targets:

OCBC Investment Research ‘hold’ $35.45 Citi Research ‘buy’ $37.50

Mixed reactions following bonus issue

Analysts have tweaked their target prices for DBS Group Holdings after the bank began trading ex-dividend on April 22. During its results for the FY2023 ended Dec 31, 2023, DBS also announced that it will be proposing a 1-for-10 bonus issue. The bonus shares will also qualify for the bank’s dividends from 1QFY2024 onwards.

OCBC Investment Research analyst Carmen Lee has retained her “hold” call despite DBS’s record set of results for FY2023 and its outperformance of the benchmark and its peers since the start of the year.

As at Lee’s report dated April 22, shares in DBS have been 9.0% up year-to-date (ytd). In comparison, the benchmark Straits Times Index (STI) is down 2.0% while the FTSE ST All-Share Financials is up 5.8% during the same period.

Yet, the analyst has lowered her fair value estimate to $35.45 from $39 previously to account for the new bonus shares.

“For 2024, management is guiding for a dividend per share (DPS) of $2.16 or 54 cents per quarter. This is an increase from $1.92 in FY2023. The new bonus shares will also be entitled to the same dividend payout of $2.16 per share,” Lee notes.

“After the share price adjustment for the bonus issue and based on DPS of $2.16, the dividend yield works out to be 6.5% — this is attractive versus the other big-cap Singapore listed companies and its regional banking peers,” she adds.

At the same time, Citi Research analyst Tan Yong Hong has kept his “buy” call with a raised target price of $37.50 from $36.73 previously. Tan’s new target price implies an FY2024 P/B of 1.7 times.

In his report also dated April 22, Tan likes DBS’s prospects, noting that the bank’s shares peaked at 4% higher than its April 19 closing price of $33.10 during the day on April 22, higher than its peers’ 1% to 2% rise. This compares with the bank’s closing price of $28.81 as at Feb 6 when the bonus issue was announced.

“Since there was no fundamental news driving up DBS’s shares to outperform peers, we expect [DBS’s] share price to normalise ahead,” Tan writes.

Going into the 1QFY2024, Tan expects DBS’s wealth fees to exceed its record FY2021 levels due mainly to robust asset under management (AUM) inflows.

Finally, Tan is expecting the bank to see “constructive” on its net interest margin (NIM) and net interest income (NII) guidance with the market now pricing in under 50 bps of rate cuts this year.

For the FY2024, Tan expects DBS’s total DPS to come in at $2.22, with the bank likely to distribute a DPS of 54 cents per quarter for the 1QFY2024 to 3QFY2024. He also sees a slightly higher DPS of 60 cents for the 4QFY2024.

“We maintain ‘buy’ but prefer UOB due to light investors’ positioning and our expectations for constructive guidance/trends in 1QFY2024,” writes Tan. —