Analysts raise target prices, dividend estimates on DBS, predicting higher valuation ahead
ANALYSTS raised their target prices for DBS after the lender posted full-year net profit that reached a record high. This was pointing 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 maintained its “buy” rating and raised its target price by nearly 15 per cent to S$51.20 from S$44.70 on Tuesday.
Maybank said that DBS is 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 dividends per share (DPS) by 14 to 22 per cent between FY2025 and FY2027.
“The group’s capital returns policies should deliver dividend yields more than 6.5 per cent. All this justifies a higher valuation, in our view,” it said.
“The succession of the new CEO is ensuring stability, while also increasing focus on growing high return on equity (ROE) segments of the group,” Maybank added.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Given those factors, Maybank analysts forecast DBS’ sustainable ROE to average 15.8 per cent in FY2025 to FY2027, as compared to 12 per cent in the past 10 years.
DBS chief executive Tan Su Shan 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.
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 would start with a capital return dividend of S$0.15 per share per quarter for FY2025 that DBS announced on Monday, RHB added.
That is over and above its earlier share buyback programme and 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.
