Friday, 30 April 2021

DBS posted record Q1 21 profit. BUT high PB ratio 1.47 and low dividend yield 2.4%

I was certainly not expecting this. DBS reported record quarterly profit of $2 billion in the 1st quarter of 2021. DBS CEO Piyush Gupta said, “This has been an extraordinary quarter for our business as we fired on all cylinders." 

Click image to enlarge

A brief summary:

- Net Interest Margin stabilised at 1.49% (same ratio as last quarter - 2020 Q4).
- Net interest Income is the only one that dropped (15%) compared to 2020 Q1.
- Net fee and commission income, and Other non-interest income exceeded pre-covid levels (compared to 2019 Q1).  This includes wealth management, transaction service fees and card fees.
Net Book Value is $20.46.
- Dividends declared is $0.18. disappointing that MAS did not lift the dividends cap. 

The important ratios to take note of

Click image to enlarge

The ratios such as Return on Assets, Return on Equity, Non-performing loan rate, Common Equity Tier-1 ratio has shown improved.  

Based on its currently trading price of $30.10, the Price to Book ratio is 1.47 and Dividend Yield is 2.4% (if MAS does not lift the dividend cap in FY21). 

Click image to enlarge

If you look at the last 5 years of data, DBS is trading at high valuations. It is trading at a high PB ratio, reaching 2018 highs. In terms of yield, it is very low at 2.4%. If MAS lift the cap next quarter and DBS pay a dividend amount of $0.33 cents per quarter, the yield will be more decent at 3.9%. 

If we look back at past data, DBS  traded at PB ratio of 2.6 and yield of 2.1% in 2000. Is it going to trade a such valuations moving forward?

No comments:

Post a comment