DBS Group Holdings Ltd (SGX: D05) Share Price at S$21.28: What's the Business Behind This?
When we invest in stocks, we should look beyond its ticker symbol and share price to find out what business it is involved in.
As Peter Lynch once said:
“Behind every stock is a company. Find out what it’s doing.”
On that note, let’s explore DBS Group Holdings Ltd (SGX: D05) to understand more about it as a company, from an investor’s perspective.
What’s DBS Group’s Business About?
DBS is another Singapore-listed company that doesn’t need much introduction.
DBS is Singapore’s largest bank and one of the biggest financial services group in Asia, with more than 280 branches across 18 markets.
The bank has four primary business segments, and they are:
- Consumer Banking/Wealth Management;
- Institutional Banking;
- Treasury Markets; and
DBS Group’s Financial Highlights
DBS has grown its business well over the past five years, as seen from the table below:
2015 2016 2017 2018 2019
10,801 11,489 11,924 13,183 14,544
Net profit (excluding one-time items)
4,318 4,238 4,390 5,625 6,391
Net asset value (S$) 15.82 16.87 17.85 18.12 19.17
Return on equity (%) 11.2 10.1 9.7 12.1 13.2
Total income grew 7.7% annually, from S$10.8 billion in 2015 to S$14.5 billion in 2019.
Meanwhile, net profit (excluding one-off items) improved by a commendable 10% per annum during the same period.
The bank’s net asset value (NAV) climbed 5% annually from 2015 to 2019.
NAV is the difference between a company’s assets and its liabilities. By analysing a bank’s NAV over the years, we can see how much the bank’s capital has grown.
Over the long-term, a bank’s share price tends to rise in line with its capital growth.
The expansion of DBS’ return on equity (ROE) from 11.2% to 13.2% shows that the bank’s management is efficient in increasing shareholder value.
However, for the 2020 first-quarter, DBS saw its net profit fall 29% year-on-year to S$1.2 billion due to higher allowances to cope with the COVID-19 pandemic.
With that, its ROE fell to 9.2% from 14%.
DBS Group’s Dividend History
From 2015 to 2019, DBS’ dividend per share has surged around 20% per annum, from S$0.60 to S$1.23.
Year Dividend per share (S$)
(includes special dividend of S$0.50)
DBS said in its 2019 earnings that going forward, barring unforeseen circumstances, the annualised dividend would be S$1.32 per share.
It said that the higher dividend is in line with its “policy of paying sustainable dividends that rise progressively with earnings”.
For its latest quarter, DBS increased its dividend per share to S$0.33, even though net profit fell.
Major Risk For DBS Group To Take Note Of
In my opinion, the rise of fintech players is a major threat for Singapore banks, including DBS.
This is especially so with Singapore’s central bank, the Monetary Authority of Singapore, issuing up to five digital bank licences this year.
To its credit, though, DBS has been innovating its services amid the digital disruption.
DBS Group’s Share Price And Valuation
DBS’ share price has risen by just 2% over the past five years to S$21.28 at the time of writing.
In recent times, the bank’s shares have been hit by weak market sentiments due to the coronavirus.
At DBS’ latest share price of S$21.28, it has a price-to-book ratio of 1.07x and a dividend yield of 6.2% (based on its dividend guidance of S$1.32 per share).
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock.