Analysts raise target prices, dividend estimates on DBS, predicting higher valuation ahead
Maybank says DBS is giving significant visibility on capital returns
ANALYSTS have raised their target prices for DBS after the lender on Monday (Feb 10) posted full-year net profit that reached a record high. This points to potentially higher valuations and the bank dishing out more dividends ahead.
Maybank Securities raised its target price for DBS by nearly 10 per cent to S$51.37 from S$46.91, with a “buy” rating. RHB on Tuesday maintained its “buy” rating, and raised its target price by nearly 15 per cent to S$51.20 from S$44.70.
Shares of DBS closed S$0.53 or 1.2 per cent lower at S$44.85 on Tuesday.
Maybank said DBS was giving significant visibility on capital returns. While earnings could grow at just 1 per cent compound annual growth rate between FY2025 and FY2027, dividends could expand at 7 per cent, delivering yields higher than 6.5 per cent, it said.
Maybank upgraded its estimate for dividend per share (DPS) by 14 to 22 per cent between FY2025 and FY2027.
“The group’s capital returns policies should deliver dividend yields of more than 6.5 per cent. All this justifies a higher valuation, in our view,” it said.
It added that the succession of DBS’ new CEO was ensuring stability, while also increasing the lender’s focus on growing segments with a high return on equity (ROE).
Given those factors, Maybank analysts forecast DBS’ sustainable ROE to average 15.8 per cent in FY2025 to FY2027, compared to 12 per cent in the past 10 years.
DBS deputy chief executive Tan Su Shan has said she will focus on growing businesses that provide a high ROE when she takes over the helm at the lender from Mar 28.
Among its high ROE businesses, a “standout” performer is its wealth management segment, said DBS.
The bank said on Monday that its full-year net profit hit a new record high of S$11.3 billion, up 12 per cent from the year-ago period. Treasury customer sales reached a new high, fee income crossed S$4 billion for the first time, and markets trading income rebounded, according to DBS.
It posted net profit for the fourth quarter that was 11 per cent higher compared with the year-ago period
RHB added that one key highlight was DBS’ management providing clarity on the quantum of excess capital of S$8 billion, and reaffirming its commitment to return this to shareholders over the next three years.
That will start with a capital return dividend of S$0.15 per share per quarter for FY2025 that DBS announced on Monday.
That is over and above its earlier share buyback programme and a S$0.24 increase in ordinary DPS this year, RHB noted. After factoring in the capital return dividend, RHB’s estimate for its FY2025 DPS is S$3.06, from S$2.46.
