Asia Pacific Equity Research 05 April 2014
Overweight
DBS Group Holdings
DBSM.SI, DBS SP Price: S$16.55
No stress in trade loans - takeaways from meeting with GTS head
Price Target: S$20.00
We met DBS GTS head Tom McCabe today and came back with renewed confidence in our view that DBS trade loans are not at risk as of now. The discussions included details of credit underwriting, due diligence processes and documentary requirements. The bank has significantly revamped its credit risk management over the last four years, and we believe the resilience of asset quality will lead to short covering going into 1Q14 results and a re-rating of the stock during the course of the year. Maintain OW and a regional top pick. We believe improvements in credit risk management over the last few years will be tested in coming quarters. As of now, the key area of focus is trade finance loans in China, which will likely shift to Singapore and HK property-related loans in a few months as the property price/volume data in these markets deteriorate. If the asset quality holds up, it should lead to a meaningful re-rating of the stock, as was the case with a Singapore bank peer in 2008-09. We expect DBS to report S$886mn of core profit in 1Q14, up 10% q/q and down 7% y/y. This will be driven by higher non-II (+24% q/q) on the back of stronger fee income and trading income growth. We estimate credit costs to increase by 18bps q/q to 40bps, resulting in 12% growth in pre-tax income. We adjust our FY14/15 estimates slightly lower by 2% and introduce FY16 estimates. We expect S$886mn of core profits in 1Q14 (up 10% q/q, down 7% y/y). This will be driven by higher non-II (+24% q/q) on the back of stronger fee income and trading income growth. We maintain our Dec-14 PT of S$20.00 based on a 2-stage DDM. Key risks to our view include asset quality deterioration, higher-thanexpected NIM pressure, lack of cost discipline, and a significant turn in treasury income due to recent fixed-income volatility. DBS Group Holdings Ltd (Reuters: DBSM.SI, Bloomberg: DBS SP) S$ in mn, year-end Dec FY11A FY12A FY13A FY14E Operating Profit (S$ mn) 4,281 4,450 5,009 5,719 Net Profit (S$ mn) 3,035 3,809 3,672 3,853 Cash EPS (S$) 1.25 1.56 1.49 1.56 Fully Diluted EPS (S$) 1.25 1.56 1.49 1.56 DPS (S$) 0.56 0.56 0.58 0.60 EPS growth (%) 83.4% 24.7% (4.7%) 4.7% ROE 11.1% 12.7% 11.3% 10.6% P/E (x) 13.2 10.6 11.1 10.6 BVPS (S$) 11.62 12.76 13.47 15.54 P/BV (x) 1.42 1.30 1.23 1.07 Dividend Yield 3.4% 3.4% 3.5% 3.6% Source: Company data, Bloomberg, J.P. Morgan estimates.
FY15E 7,000 4,611 1.83 1.83 0.64 17.6% 11.3% 9.0 16.43 1.01 3.9%
FY16E 8,664 5,600 2.18 2.18 0.68 19.4% 12.7% 7.6 17.61 0.94 4.1%
Singapore Banks AC
Harsh Wardhan Modi
(65) 6882- 2450
[email protected] Bloomberg JPMA MODI
J.P. Morgan Securities Singapore Private Limited
Josh Klaczek (852) 2800-8534 [email protected] J.P. Morgan Securities (Asia Pacific) Limited
Rikin K Shah (91-22) 6157-3969 [email protected] J.P. Morgan India Private Limited Price Performance 18.0 17.0 S$ 16.0 15.0 14.0 Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
DBSM.SI share price (S$) FTSTI (rebased)
Abs Rel
YTD -3.2% -4.6%
1m 1.3% -2.2%
3m -2.5% -5.1%
12m 3.6% 6.5%
Call playback details: Number: +65 6221 3762 Reference: 257685 Pass code: 368749 Duration: 2 hours
Company Data 52-week Range (S$) Market Cap (S$ mn) Market Cap ($ mn) Shares O/S (mn) Fiscal Year End Price (S$) Date Of Price 3M - Avg daily val (S$ mn) 3M - Avg daily val ($ mn) 3M - Avg daily vol (mn) FTSTI Exchange Rate Price Target End Date
17.90-15.18 40,543 32,095 2,450 Dec 16.55 04 Apr 14 71.78 56.8 4.38 3212.72 1.26 31-Dec-14
See page 19 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.jpmorganmarkets.com
Asia Pacific Equity Research 05 April 2014
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Key catalysts for the stock price: • Likely beneficiary of rising interest rates in 2015 • Improved credit risk management
Key financial metrics NII (LC) Total revenue (LC) Revenue growth (%) Costs (LC) PPOP (LC) LLP (LC) Net income (LC) NIMs (%) Non-II/Revenue (%) CIR (%) Costs/Assets (%) PPOP/Assets (%) LLP/Loans (%) ROA (%) ROE (%) Tier 1 capital (%) NPL ratio (%) NPL coverage (%) Key model assumptions Loan growth Deposit growth NIMs (%)
FY13 5,569 8,927 10.7% (3,918) 5,009 (756) 3,672 1.6% 37.6% 43.9% 1.0% 1.2% 0.3% 1.0% 11.3% 13.7% 1.2% 124.1% FY13 8.6% 12.5% 1.7%
Upside risks to our view: • Resilient asset quality • Better-than-expected margins.
FY14E 6,355 9,996 12.0% (4,276) 5,719 (1,047) 3,853 1.6% 36.4% 42.8% 1.0% 1.2% -0.3% 0.9% 10.6% 13.3% 1.2% 126.7% FY14E 17.9% 15.3% 1.6%
FY15E 7,480 11,667 16.7% (4,668) 7,000 (1,394) 4,611 1.7% 35.9% 40.0% 1.0% 1.4% -0.4% 1.0% 11.3% 13.1% 1.4% 127.5% FY15E 9.4% 10.3% 1.6%
FY16E 8,945 13,760 17.9% (5,096) 8,664 (1,842) 5,600 1.9% 35.0% 37.0% 1.0% 1.8% -0.5% 1.1% 12.7% 13.0% 1.8% 118.5% FY16E 10.0% 10.5% 1.7%
Source: Company and J.P. Morgan estimates.
Sensitivity analysis Sensitivity to 5% change on revenue growth 10bps change in NIM 1% change in CIR 10bps change in credit costs
Downside risks to our view: • Higher-than-expected NIM pressure • Lack of cost discipline • Inability of the bank to move up the curve.
Valuation and price target basis Our Dec-14 price target is based upon 2-stage DDM. We use a fair P/B based multiple of 1.15x, with a normalised RoE of 10.1%.
Chart to support valuation and price target PB based Valuation Normalised RoE Risk-free rate Cost of capital Long term growth Fair PB
10.1% 3.00% 9.00% 2.00% 1.15x
PV of Terminal Value PV of Dividends PV of today's Fair Value PB based Dec-14E Fair Value
S$17.0 S$1.1 S$18.1 S$19.8
Source: Bloomberg, Company data and J.P. Morgan estimates.
PPOP FY14E FY15E 7.8% 7.1% 6.9% 6.2% 1.7% 1.7% NA NA
EPS FY14E FY15E 9.9% 9.3% 8.7% 8.0% 2.2% 2.2% 5.9% 5.4%
Source: J.P. Morgan estimates.
JPMe vs. consensus, change in estimates EPS JPMe old JPMe new % chg Consensus
FY14E 1.57 1.56 -1% 1.54
FY15E 1.87 1.83 -2% 1.73
Div yield FY14E FY15E 3.6 3.7 3.4 3.6 3.5 3.7
YTD Stock perf. -3.2% 2.2% -4.8%
Source: Bloomberg, J.P. Morgan estimates.
Comparative metrics Singapore Banks (JPM Coverage) DBS Group Holdings (DBS SP) United Overseas Bank (UOB SP) OCBC (OCBC SP)
CMP LC 16.55 21.70 9.71
Mkt Cap $Mn 32,135 27,156 26,470
P/E FY14E FY15E 10.5 8.9 12.3 10.8 12.1 11.3
Source: Bloomberg, Company data and J.P. Morgan estimates. Prices as of 04 Apr 14
2
P/BV FY14E
FY15E 1.2 1.3 1.3
1.1 1.2 1.2
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 05 April 2014
Notes from the meeting Please click here for link to company’s GTS presentation. Key discussion points included the following: Cash and deposits is the key focus of GTS Trade is good but payment system is where the profitability is FX component of payments is lucrative 35-36% CIR in a steady state phase (vs. 38% in 2013) 3Q/4Q12 saw NIM compression, but NIMs back up again Entering 2014 with good momentum Product mix has changed, leading to better pricing Clients doing other businesses with banks, are getting lower pricing on trade whereas Trade only clients are getting higher pricing 18mn revenue on 5bn of asset sold (loans) last year to 40 investors Target triple the sale of assets 60-80% RoE on this business vs. 20-25% RoE on overall GTS The loans sold are generally without recourse and the bank does not have any obligation to back-stop in case of a default There are 40 investors, including banks, insurance companies, pension funds, etc., who run detailed analysis of a bank’s credit risk management before buying the assets off the bank In addition to higher RoE, selling these loans leads to added lending capacity for the borrower, which would otherwise breach the single borrower limits The bank is working on an innovative working capital advisory, which is based on database of 65k companies Looking at 10-15 bps NIM increase in trade business 4.5 months of avg trade loan duration Use credit insurance and collateralization Credit risk management/due diligence Making sure documentation is in place There are processes to ensure goods being shipped are actually genuine Restrict logistics firms to reputable ones and Warehouses are checked for actual receipt of goods Due diligence is done on a customer once and then on every trade deal Few defaults in China can flush out a few marginal players Very comfortable with China Trade loans as of now
3
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 05 April 2014
No instance of any major increase in repayments recently No visible impact of CNH moves in last couple of months In addition to these, we delved a bit deeper into the break-up of S$62bn of trade loans. The details are as per the table below.
Table 1: Trade loans break-up S$bn
Remarks
Bank Backed Customer Backed Trade Finance Loans
12 50 62
Breakdown of Customer backed loans Plain Vanilla Cash backed Single recourse
22 6 28
Working capital (WC) backed
Dual recourse
22
Backed by bank Letter of Credit + Customer's WC
Source: J.P. Morgan estimates, Company data.
Overall, we stay with the view that there are limited reasons to believe that asset quality in the trade finance book will deteriorate in the near term, save for a tail-event in China.
4
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 05 April 2014
Short Sell Turnover The short interest in DBS shot up in late February as CNY depreciation took hold. We believe most of these shorts will likely be covered going into the 1Q14 results. Figure 1: DBS Short Interest
Source: Bloomberg.
Figure 2: CNY depreciation
Source: Bloomberg.
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Asia Pacific Equity Research 05 April 2014
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
1Q14 Results Preview DBS will report its 1Q results on 30 April (per Bloomberg). We expect DBS to report S$886mn of core profits in 1Q14, up 10% q/q and down 7% y/y. This will be driven by higher non-II (+24% q/q) on the back of stronger fee income and trading income growth. We estimate credit costs to increase by 18bps q/q to 40bps, resulting in 12% growth in pre-tax income. Table 2: DBS: 1QFY14 results preview PROFIT AND LOSS
1Q12 1,870
2Q12 1,912
3Q12 1,939
4Q12 1,900
1Q13 1,920
2Q13 1,975
3Q13 2,006
4Q13 2,085
1Q14E 2,156
YoY 12%
QoQ 3%
Interest Expense
(534)
(588)
(607)
(607)
(593)
(593)
(600)
(631)
(657)
11%
4%
Net Interest Income
1,336
1,324
1,332
1,293
1,327
1,382
1,406
1,454
1,499
13%
3%
Non-Interest Income
820
621
672
666
990
927
744
697
865
-13%
24%
Net Fee income
406
379
422
372
507
477
462
439
505
0%
15%
Trading income
292
133
130
134
408
336
188
163
240
-41%
47%
Other operating income
122
109
120
160
75
114
94
95
120
60%
26%
Operating Revenue
2,156
1,945
2,004
1,959
2,317
2,309
2,150
2,151
2,364
2%
10%
Operating Costs
(898)
(872)
(901)
(943)
(952)
(987)
(949)
(1,030)
(1,025)
8%
-1%
PPOP
1,258
1,073
1,103
1,016
1,365
1,322
1,201
1,121
1,339
-2%
19%
Loan loss provisions
(128)
(104)
(55)
(122)
(223)
(245)
(151)
(137)
(255)
14%
86%
39
36
28
21
27
22
17
13
20
-26%
54%
Pre-Tax
1,153
1,005
1,076
923
1,169
1,099
1,067
983
1,104
-6%
12%
Tax
(170)
(143)
(165)
(110)
(167)
(162)
(152)
(134)
(158)
-5%
18%
MI and EO
(50)
(52)
(55)
(53)
(52)
(50)
(53)
(47)
(60)
15%
28%
Core Attributable profit
933
810
856
760
950
887
862
802
886
-7%
10%
-7%
-9%
Interest Income
Other income
Non-recurring gains Net attributable profit
-
-
-
450
-
-
-
171
-
933
810
856
1,210
950
887
862
973
886
28,034
29,930
30,282
31,574
32,571
32,279
32,410
33,430
34,840
7%
4%
Gross Loans
199,581
207,399
204,729
213,828
227,029
238,393
245,280
252,181
255,314
12%
1%
Net Loans
196,382
204,070
201,412
210,519
223,670
234,787
241,723
248,654
251,532
12%
1%
Deposits
232,186
230,566
240,178
253,464
262,645
274,608
284,489
292,365
299,738
14%
3%
NPL
2,648
2,761
2,649
2,627
2,670
2,875
2,938
2,882
2,932
10%
2%
LLR
3,199
3,329
3,317
3,309
3,359
3,606
3,557
3,527
3,782
13%
7%
Common Equity
Change in bps NIM
1.8%
1.7%
1.7%
1.6%
1.6%
1.6%
1.6%
1.6%
1.6%
(3)
(2)
CIR
41.7%
44.8%
45.0%
48.1%
41.1%
42.7%
44.1%
47.9%
43.3%
225
(454)
LDR Credit Costs (bps)
86.0%
90.0%
85.2%
84.4%
86.4%
86.8%
86.2%
86.3%
85.2%
(126)
(108)
(25.82)
(20.44)
(10.68)
(23.32)
(40.47)
(42.11)
(24.98)
(22.03)
(40.25)
0
(18)
NPL Ratio
1.3%
1.3%
1.3%
1.2%
1.2%
1.2%
1.2%
1.1%
1.1%
(3)
1
Coverage Ratio
121%
121%
125%
126%
126%
125%
121%
122%
129%
318
660
Source: J.P. Morgan estimates, Company data.
6
Asia Pacific Equity Research 05 April 2014
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Valuation and Performance We maintain our OW call on this stock with a DDM-derived Dec-14 PT of S$20 as per the table below. We use a fair P/B based multiple of 1.15x with a normalised RoE of 10.1%. Figure 3: DBS valuation: DDM details Core Net Core EPS
P/E
BVPS
P/B
Dividend
Div Yld
Core RoA Core RoRWA Core RoE
(S$ mn)
(S$)
(x)
(S$)
(x)
(S$)
(%)
(%)
(%)
(%)
2013
3,501
1.42
11.7
13.5
1.23
0.58
3.5%
0.93%
1.54%
10.8%
2014E
3,853
1.56
10.6
15.5
1.07
0.60
3.6%
0.91%
1.53%
10.6%
2015E
4,611
1.84
9.0
16.4
1.01
0.64
3.9%
0.99%
1.66%
11.3%
2016E
5,600
2.19
7.6
17.6
0.94
0.68
4.1%
1.10%
1.83%
12.7%
Price (S$)
16.55
Normalised RoE
Number of shares (mn)
2,442
PB based Valuation
Market Cap (S$ mn)
40,416
PE based Valuation
NIM (on av g. assets)
1.62%
Risk-free rate
3.00%
Fair PE
Non-IR/rev enues
35.8%
Cost of capital
9.00%
2014E EPS
S$1.42
Cost/income
39.8%
Long term grow th
2.00%
PE based Dec-14E Fair Value
S$16.2
Operating RoA
1.52%
Fair PB
1.15x
Im plied Value of Growth
LLP/Loans
-0.70%
PV of Terminal Value
Net RoAA
0.89%
PV of Div idends
Equity /Assets Normalised RoE
8.8% 10.1%
S$17.0
12m Rolling EPS
11.5x
S$1.38
S$1.1
Capitalized Value (S$)
$15.3
PV of today 's Fair Value
S$18.1
Value of Growth (S$)
$1.2
PB based Dec-14E Fair Value
S$19.8
Attributable to Growth
7.4%
Source: J.P. Morgan estimates, Company data.
The stock has outperformed (~14%) STI Index in the last three years due to solid fee business (contributing 36% on average to the total revenue). The bank has managed a transition to stable and growing non-interest income from consistent volatility in the last decade. Figure 4: Share price performance relative to the index 130 120
STI
DBS
110 100 90 80 70
Source: Bloomberg.
7
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 05 April 2014
Share Price vs. Earnings Revision DBS has been positively correlated with earnings revisions. Post 1Q13, there was upward earning revisions which acted as a catalyst and drove the stock price upwards. Stock price decoupled with earnings trajectory due to EM sell-off in the months of May and June last year. There were YTD negative revisions due to China trade finance concerns which led to 10% correction in the stock price but the stock price increased meaningfully more recently. Figure 5: DBS: Earnings Revision
Source: Bloomberg.
JPM vs. Consensus Our estimates are 1.5%, 6.2% and 12.4% above the Street for FY13, FY14 and FY15, respectively. We are more positive than the Street due to benign expectations on non-interest income. Figure 6: DBS: Earnings – J.P. Morgan vs. Consensus J. P. Morgan
Consensus
FY14E
1.56
1.54
1.5%
FY15E
1.83
1.73
6.2%
FY16E
2.18
1.95
12.4%
Source: Bloomberg, J.P. Morgan estimates.
8
Difference in %
Asia Pacific Equity Research 05 April 2014
Valuation sensitivity We use a 2-stage DDM to arrive at our PT of S$20. Key assumptions are CoE of 9.0%, RoE of 10.1%, and a terminal growth rate of 2.0%. Tables below reflect the sensitivity of changes to the fair value based on the changes to these variables.
TERMINAL GROWTH
Figure 7: Valuation sensitivity - CoE vs. terminal growth COST OF EQUITY 8.5% 9.0% 20.2 19.2 20.4 19.3 20.6 19.5 20.8 19.6
9.5% 18.4 18.4 18.5 18.5
10.0% 17.6 17.6 17.6 17.6
10.5% 16.9 16.8 16.8 16.8
21.1
19.8
18.6
17.6
16.7
23.2
21.4
20.0
18.7
17.6
16.7
23.8
21.8
20.2
18.8
17.6
16.6
24.5
22.3
20.4
18.9
17.6
16.5
0.00% 0.50% 1.00% 1.50%
7.0% 23.9 24.4 25.1 25.8
7.5% 22.5 22.9 23.3 23.9
8.0% 21.3 21.5 21.9 22.2
2.00%
26.7
24.5
22.6
2.50%
27.8
25.2
3.00%
29.1
26.1
3.50%
30.9
27.3
Source: J.P. Morgan estimates.
Figure 8: Valuation sensitivity - RoE vs. terminal growth
TERMINAL GROWTH
RETURN ON EQUITY 8.6%
9.1%
9.6%
10.1%
10.6%
11.1%
11.6%
12.1%
0.00%
16.5
17.4
18.3
19.2
20.1
21.0
21.9
22.8
0.50%
16.5
17.4
18.4
19.3
20.3
21.2
22.2
23.1
1.00%
16.4
17.4
18.5
19.5
20.5
21.5
22.5
23.5
1.50%
16.4
17.5
18.5
19.6
20.7
21.7
22.8
23.9
2.00%
16.3
17.5
18.6
19.8
20.9
22.1
23.2
24.4
2.50%
16.3
17.5
18.7
20.0
21.2
22.4
23.7
24.9
3.00%
16.2
17.5
18.8
20.2
21.5
22.9
24.2
25.5
3.50%
16.1
17.5
19.0
20.4
21.9
23.4
24.8
26.3
Source: J.P. Morgan estimates.
Figure 9: Valuation sensitivity - RoE vs. CoE COST OF EQUITY
RETURN ON EQUITY
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
8.6%
22.0
20.2
18.7
17.4
16.3
15.4
14.6
13.8
9.1%
23.5
21.6
20.0
18.6
17.5
16.5
15.6
14.8
9.6%
25.1
23.0
21.3
19.9
18.6
17.5
16.6
15.8
10.1%
26.7
24.5
22.6
21.1
19.8
18.6
17.6
16.7
10.6%
28.3
25.9
24.0
22.3
20.9
19.7
18.6
17.7
11.1%
29.8
27.4
25.3
23.6
22.1
20.8
19.6
18.6
11.6%
31.4
28.8
26.6
24.8
23.2
21.8
20.6
19.6
12.1%
33.0
30.2
28.0
26.0
24.4
22.9
21.7
20.6
Source: J.P. Morgan estimates.
9
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 05 April 2014
Balance Sheet Structure Table 3: DBS: Common Size Statement Common Size ASSETS Loans Other IEA Other Non IEA Total Assets
2011
2012
2013
2014E
2015E
2016E
57.0% 31.3% 11.7% 100.0%
59.6% 31.2% 9.1% 100.0%
61.9% 30.0% 8.1% 100.0%
61.4% 30.7% 7.9% 100.0%
61.2% 31.2% 7.7% 100.0%
62.1% 30.5% 7.4% 100.0%
LIABILITIES Deposits Other IBL Other Liabilities Equity Total Liabilities
66.1% 16.2% 8.0% 9.7% 100.0%
71.8% 9.8% 8.2% 10.2% 100.0%
72.7% 10.5% 7.4% 9.4% 100.0%
73.1% 10.8% 7.1% 9.1% 100.0%
73.4% 11.0% 6.7% 8.8% 100.0%
73.6% 11.3% 6.4% 8.7% 100.0%
Source: Company reports and J.P. Morgan estimates.
Table 4: DBS: YOY Growth YoY Growth ASSETS Loans Other IEA Other Non IEA Total Assets
2011
2012
2013
2014E
2015E
2016E
28.1% 6.1% 26.8% 20.1%
8.4% 3.3% -19.1% 3.6%
18.1% 9.5% 1.2% 13.9%
9.1% 12.0% 6.8% 9.8%
9.6% 11.9% 6.9% 10.1%
12.1% 8.1% 7.0% 10.5%
LIABILITIES Deposits Other IBL Other Liabilities Equity Total Liabilities
16.3% 46.7% 41.1% -0.1% 20.1%
12.5% -37.3% 6.2% 8.9% 3.6%
15.3% 22.0% 2.6% 4.7% 13.9%
10.3% 12.4% 5.0% 6.2% 9.8%
10.5% 12.8% 5.0% 7.4% 10.1%
10.8% 13.2% 5.0% 8.9% 10.5%
Source: Company reports and J.P. Morgan estimates.
Figure 10: DBS: LDR 87.0% 86.0% 85.0% 84.0% 83.0% 82.0% 81.0% 80.0% 2011
2012
Source: Company reports and J.P. Morgan estimates.
10
2013
2014E
2015E
2016E
Asia Pacific Equity Research 05 April 2014
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Earnings estimates Table 5: DBS: P&L S$ in mn Interest Income Interest Expense Net Interest Income Non-Interest Income Net Fee income Trading income Other operating income Total Revenues Costs PPOP Loan loss provisions Other provisions Pre-Tax Tax Profit before MI MI & EO Core profit
2005 5,542 (2,599) 2,943 1,395 986 207 202 4,338 (2,026) 2,312 (203) 2,163 (353) 1,810 (161) 1,649
2006 7,809 (4,218) 3,591 1,753 1,155 330 268 5,344 (2,369) 2,975 (135) 2,910 (575) 2,335 (160) 2,175
2007 9,090 (4,982) 4,108 2,055 1,462 94 499 6,163 (2,618) 3,545 (191) (426) 3,038 (589) 2,449 (171) 2,278
2008 8,122 (3,821) 4,301 1,752 1,274 23 455 6,053 (2,655) 3,398 (653) (235) 2,585 (446) 2,139 (210) 1,929
2009 6,114 (1,659) 4,455 2,148 1,394 433 321 6,603 (2,604) 3,999 (1,267) (285) 2,513 (285) 2,228 (187) 2,041
2010 5,699 (1,381) 4,318 2,748 1,397 895 456 7,066 (2,925) 4,141 (846) (65) 3,332 (454) 2,878 (228) 2,650
2011 6,555 (1,730) 4,825 2,759 1,542 680 537 7,584 (3,303) 4,281 (672) (50) 3,686 (443) 3,243 (255) 2,988
2012 7,621 (2,336) 5,285 2,779 1,579 689 511 8,064 (3,614) 4,450 (409) (8) 4,157 (588) 3,569 (210) 3,359
2013 7,986 (2,417) 5,569 3,358 1,885 1,095 378 8,927 (3,918) 5,009 (756) (14) 4,318 (615) 3,703 (202) 3,501
2014E 9,184 (2,830) 6,355 3,641 2,074 1,095 473 9,996 (4,276) 5,719 (1,047) 4,752 (677) 4,076 (222) 3,853
2015E 11,498 (4,017) 7,480 4,187 2,385 1,259 543 11,667 (4,668) 7,000 (1,394) 5,687 (810) 4,877 (266) 4,611
2016E 14,821 (5,876) 8,945 4,815 2,742 1,448 625 13,760 (5,096) 8,664 (1,842) 6,906 (984) 5,923 (323) 5,600
2005 1.85% 89.5% 1.65%
2006 2.15% 88.6% 1.90%
2007 2.16% 88.3% 1.91%
2008 2.07% 84.9% 1.76%
2009 2.02% 85.6% 1.73%
2010 1.84% 86.6% 1.59%
2011 1.77% 87.4% 1.55%
2012 1.70% 89.7% 1.52%
2013 1.62% 91.3% 1.48%
2014E 1.62% 93.0% 1.51%
2015E 1.73% 93.4% 1.61%
2016E 1.86% 93.8% 1.75%
32.16% 0.78% 2.44% 46.7% 1.14% 1.30% -0.27% 42.31% 0.03% 1.19% 1.22% -16.3% -0.09% 0.93% 1.45% 9.32% 9.9%
32.80% 0.93% 2.83% 44.3% 1.25% 1.58% -0.16% 43.94% 0.04% 1.50% 1.54% -19.8% -0.08% 1.15% 1.62% 9.38% 12.3%
33.34% 0.96% 2.86% 42.5% 1.22% 1.65% -0.20% 45.20% -0.15% 1.56% 1.41% -19.4% -0.08% 1.06% 1.39% 9.04% 11.7%
28.94% 0.72% 2.47% 43.9% 1.08% 1.39% -0.55% 48.11% -0.07% 1.12% 1.06% -17.3% -0.09% 0.79% 1.05% 8.13% 9.7%
32.53% 0.83% 2.56% 39.4% 1.01% 1.55% -0.97% 50.58% -0.08% 1.06% 0.98% -11.3% -0.07% 0.79% 1.13% 8.67% 9.1%
38.89% 1.01% 2.61% 41.4% 1.08% 1.53% -0.59% 52.97% 0.01% 1.23% 1.23% -13.6% -0.08% 0.98% 1.47% 9.49% 10.3%
36.38% 0.88% 2.43% 43.6% 1.06% 1.37% -0.38% 56.26% 0.02% 1.18% 1.18% -12.0% -0.08% 0.96% 1.51% 8.79% 10.9%
34.46% 0.80% 2.32% 44.8% 1.04% 1.28% -0.20% 59.20% 0.03% 1.20% 1.20% -14.1% -0.06% 0.97% 1.56% 8.66% 11.2%
37.62% 0.89% 2.36% 43.9% 1.04% 1.33% -0.32% 61.72% 0.02% 1.14% 1.14% -14.2% -0.05% 0.93% 1.54% 8.61% 10.8%
36.43% 0.86% 2.37% 42.8% 1.01% 1.36% -0.40% 62.60% 0.02% 1.13% 1.13% -14.2% -0.05% 0.91% 1.53% 8.61% 10.6%
35.89% 0.90% 2.52% 40.0% 1.01% 1.51% -0.48% 62.45% 0.02% 1.23% 1.23% -14.2% -0.06% 0.99% 1.66% 8.78% 11.3%
34.99% 0.94% 2.69% 37.0% 1.00% 1.69% -0.57% 63.01% 0.02% 1.35% 1.35% -14.2% -0.06% 1.10% 1.83% 8.62% 12.7%
Source: J.P. Morgan estimates, Company data.
Table 6: DBS: Du pont NIM (% of avg. IEA) IEA/Assets Margins (% of avg. Assets) Non-IR contribution Non-IR/Avg. Assets Revenue/Assets Cost/Income C/Assets Pre-Provision ROA LLP/Loans Loan/Assets Other Income/Assets Operating ROA Pre-Tax ROA Tax Rate Minorities & Outside Int. Core ROA Core RoRWA Equity/Assets Core ROE
Source: J.P. Morgan estimates, Company data.
11
Asia Pacific Equity Research 05 April 2014
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Table 7: DBS: Quarterly P&L S$ in mn Interest Income Interest Expense Net Interest Income Non-Interest Income Net Fee income Trading income Other operating income Total Revenues Costs PPOP Loan loss provisions Other provisions Other income Pre-Tax Tax Profit before MI MI and EO Core profit
1Q12 1,870 (534) 1,336 820 406 292 122 2,156 (898) 1,258 (128) (16) 39 1,153 (170) 983 (50) 933
2Q12 1,912 (588) 1,324 621 379 133 109 1,945 (872) 1,073 (104) 36 1,005 (143) 862 (52) 810
3Q12 1,939 (607) 1,332 672 422 130 120 2,004 (901) 1,103 (55) 28 1,076 (165) 911 (55) 856
4Q12 1,900 (607) 1,293 666 372 134 160 1,959 (943) 1,016 (122) 8 21 923 (110) 813 (53) 760
1Q13 1,920 (593) 1,327 990 507 408 75 2,317 (952) 1,365 (223) 27 1,169 (167) 1,002 (52) 950
2Q13 1,975 (593) 1,382 927 477 336 114 2,309 (987) 1,322 (245) 22 1,099 (162) 937 (50) 887
3Q13 2,006 (600) 1,406 744 462 188 94 2,150 (949) 1,201 (151) 17 1,067 (152) 915 (53) 862
4Q13 2,085 (631) 1,454 697 439 163 95 2,151 (1,030) 1,121 (137) (14) 13 983 (134) 849 (47) 802
1Q14E 2,156 (657) 1,499 865 505 240 120 2,364 (1,025) 1,339 (255) 20 1,104 (158) 946 (60) 886
2Q14E 2,244 (682) 1,563 910 530 260 120 2,473 (1,040) 1,433 (263) 20 1,190 (170) 1,020 (60) 960
3Q14E 2,335 (707) 1,628 957 557 280 120 2,584 (1,083) 1,502 (269) 20 1,253 (179) 1,074 (60) 1,014
4Q14E 2,448 (783) 1,665 909 482 315 113 2,575 (1,129) 1,446 (261) 21 1,205 (170) 1,036 (42) 993
Source: J.P. Morgan estimates, Company data.
Table 8: DBS: Quarterly Du pont NIM (% of avg. IEA) IEA/Assets Margins (% of avg. Assets) Non-IR contribution Non-IR/Avg. Assets Revenue/Assets Cost/Income C/Assets Pre-Provision ROA LLP/Loans Loan/Assets Other Income/Assets Operating ROA Pre-Tax ROA Tax Rate MI & EO Core ROA Core RoRWA Equity/Assets Core ROE
1Q12 1.76% 88.13% 1.55%
2Q12 1.72% 88.03% 1.51%
3Q12 1.68% 89.02% 1.49%
4Q12 1.63% 88.69% 1.45%
1Q13 1.64% 90.48% 1.48%
2Q13 1.62% 89.94% 1.46%
3Q13 1.61% 88.59% 1.43%
4Q13 1.62% 89.36% 1.45%
1Q14E 1.60% 91.82% 1.47%
2Q14E 1.63% 91.78% 1.50%
3Q14E 1.66% 91.74% 1.53%
4Q14E 1.66% 91.97% 1.53%
38.0% 0.95% 2.50% 41.65% 1.04% 1.5% -0.26% 57.55% 0.03% 1.31% 1.34% -14.74% -0.06% 1.08% 1.72% 8.21% 13.19%
31.9% 0.71% 2.22% 44.83% 0.99% 1.2% -0.20% 58.04% 0.04% 1.11% 1.15% -14.23% -0.06% 0.92% 1.46% 8.27% 11.18%
33.5% 0.75% 2.25% 44.96% 1.01% 1.2% -0.11% 57.75% 0.03% 1.17% 1.21% -15.33% -0.06% 0.96% 1.55% 8.44% 11.37%
34.0% 0.75% 2.20% 48.14% 1.06% 1.1% -0.23% 58.65% 0.03% 1.00% 1.03% -11.92% -0.06% 0.85% 1.41% 8.67% 9.83%
42.7% 1.09% 2.55% 41.09% 1.05% 1.5% -0.40% 60.70% 0.03% 1.26% 1.29% -14.29% -0.06% 1.05% 1.67% 8.83% 11.85%
40.1% 0.98% 2.43% 42.75% 1.04% 1.4% -0.42% 61.25% 0.02% 1.13% 1.16% -14.74% -0.05% 0.93% 1.47% 8.53% 10.94%
34.6% 0.76% 2.18% 44.14% 0.96% 1.2% -0.25% 61.38% 0.02% 1.07% 1.08% -14.25% -0.05% 0.88% 1.44% 8.21% 10.66%
32.4% 0.69% 2.14% 47.88% 1.03% 1.1% -0.22% 61.92% 0.00% 0.98% 0.98% -13.63% -0.05% 0.80% 1.35% 8.20% 9.74%
36.6% 0.85% 2.32% 43.34% 1.01% 1.3% -0.40% 62.36% 0.02% 1.07% 1.09% -14.30% -0.06% 0.87% 1.46% 8.39% 10.38%
36.8% 0.87% 2.37% 42.07% 1.00% 1.4% -0.41% 62.16% 0.02% 1.12% 1.14% -14.30% -0.06% 0.92% 1.54% 8.39% 10.99%
37.0% 0.90% 2.42% 41.89% 1.02% 1.4% -0.40% 62.27% 0.02% 1.16% 1.18% -14.30% -0.06% 0.95% 1.58% 8.33% 11.42%
35.3% 0.83% 2.36% 43.85% 1.03% 1.3% -0.38% 62.36% 0.02% 1.09% 1.10% -14.07% -0.04% 0.91% 1.52% 8.62% 10.56%
Source: J.P. Morgan estimates, Company data.
12
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 05 April 2014
P&L Sensitivity Figure 11: Impact for every 5% change to revenue growth 12.0% 9.9%
10.0% 8.0%
7.8%
6.0% 4.0% 2.0% 0.0% PPOP
EPS
Source: J.P. Morgan estimates.
Figure 12: Impact for every 10bps change to NIMs 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
8.7% 6.9%
PPOP
EPS
Source: J.P. Morgan estimates.
Figure 13: Impact for every 10bps change to credit costs 7.0% 5.9%
6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
0.0% PPOP
EPS
Source: J.P. Morgan estimates.
13
Asia Pacific Equity Research 05 April 2014
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Key Metrics Figure 14: DBS: Margin
Figure 15: DBS: Loan growth
2.20%
30.0%
2.10%
25.0%
2.00%
20.0%
1.90%
15.0%
1.80%
10.0%
1.70%
5.0%
1.60% 2005
2007
2009
2011
2013
2015E
0.0% 2005
2007
2009
Source: J.P. Morgan estimates.
Source: J.P. Morgan estimates.
Figure 16: DBS: Credit cost
Figure 17: DBS: Operating RoA
-1.00%
2011
2013
2015E
2011
2013
2015E
2011
2013
2015E
1.6%
-0.80%
1.2%
-0.60% 0.8% -0.40% 0.4%
-0.20% 0.00%
0.0% 2005
2007
2009
2011
2013
2015E
2005
2007
2009
Source: J.P. Morgan estimates.
Source: J.P. Morgan estimates.
Figure 18: DBS: Return on assets
Figure 19: DBS: Return on equity
1.20%
13.0% 11.0%
0.80%
9.0% 0.40%
7.0%
0.00%
5.0% 2005
2007
Source: J.P. Morgan estimates.
14
2009
2011
2013
2015E
2005
2007
Source: J.P. Morgan estimates.
2009
Asia Pacific Equity Research 05 April 2014
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Valuations Figure 20: DBS: P/E
Figure 21: DBSC: P/B
-2sd
0.6
Oct-13
Mar-13
Aug-12
Jun-11 Jan-12
Apr-10
Nov-10
Sep-09
Jul-08 Feb-09
Dec-07
May-07
Mar-06 Oct-06
Aug-05
Jan-05
0.6
Source: J.P. Morgan estimates.
Source: J.P. Morgan estimates.
Figure 22: DBS: Dividend yield
Figure 23: DBS: P/PPOP 25.6 20.6 15.6 +2sd +1sd Avg -1sd -2sd
10.6
Source: J.P. Morgan estimates.
Source: J.P. Morgan estimates.
Figure 24: DBS: P/Deposit
Figure 25: DBS: P/NTA
Source: J.P. Morgan estimates.
Oct-13
Mar-13
Aug-12
Jun-11 Jan-12
Nov-10
Apr-10
Sep-09
Jul-08 Feb-09
Mar-13 Oct-13
-2sd Aug-12
Oct-13
Mar-13
Aug-12
Jun-11 Jan-12
Nov-10
Apr-10
Feb-09 Sep-09
Jul-08
Dec-07
May-07
Mar-06 Oct-06
Aug-05
0.0%
Jan-05
5.0%
-1sd
Jan-12
-2sd
Nov-10 Jun-11
10.0%
Avg
Apr-10
-1sd
Sep-09
15.0%
+1sd
Feb-09
Avg
Dec-07 Jul-08
+1sd
May-07
20.0%
+2sd
Oct-06
+2sd
Jan-05
25.0%
2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6
Aug-05 Mar-06
30.0%
Dec-07
May-07
Mar-06 Oct-06
Aug-05
Jan-05
5.6 0.6
Oct-13
Mar-13
Aug-12
Jan-12
Nov-10 Jun-11
Apr-10
Sep-09
Jul-08 Feb-09
Dec-07
May-07
Oct-06
Jan-05
+2sd +1sd Avg -1sd -2sd
Aug-05 Mar-06
8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
Mar-13 Oct-13
0.8
5.6
Jan-12
-1sd
Aug-12
1.0
10.6
Apr-10
Avg
Nov-10 Jun-11
1.2
15.6
Feb-09
+1sd
+2sd +1sd Avg -1sd -2sd
Sep-09
1.4
20.6
Dec-07 Jul-08
+2sd
Oct-06
1.6
May-07
25.6
Jan-05
1.8
Aug-05 Mar-06
30.6
Source: J.P. Morgan estimates.
15
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 05 April 2014
Investment Thesis, Valuation and Risks DBS Group Holdings (Overweight; Price Target: S$20.00) Investment Thesis We met DBS GTS head Tom McCabe and came back with renewed confidence in our view that DBS trade loans are not at risk as of now. The discussions included details of credit underwriting, due diligence processes and documentary requirements. The bank has significantly revamped the credit risk management over the last four years, and we believe the resilience of asset quality will lead to short covering going into 1Q14 results and re-rating for the stock during the course of the year. Maintain OW and a regional top pick. Valuation We maintain our OW call on this stock with a DDM-derived Dec-14 PT of S$20. We use a fair P/B based multiple of 1.15x with a normalised RoE of 10.1%. Risks to Rating and Price Target Key risks to our view include asset quality deterioration, higher-than-expected NIM pressure, lack of cost discipline and a significant turn in treasury income due to recent fixed-income volatility.
16
Asia Pacific Equity Research 05 April 2014
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
DBS Group Holdings: Summary of Financials Income Statement S$ in millions, year end Dec NIM (as % of avg. assets) Earning assets/assets Margins (as % of Avg. Assets)
FY12 1.7% 89.7% 1.5%
FY13 1.6% 91.3% 1.5%
FY14E 1.6% 93.0% 1.5%
FY15E 1.7% 93.4% 1.6%
Net Interest Income Total Non-Interest Income Fee Income Dealing Income
5,285 2,779 1,579 689
5,569 3,358 1,885 1,095
6,355 3,641 2,074 1,095
7,480 4,187 2,385 1,259
Total operating revenues
8,064
8,927
9,996
11,667
Operating costs Pre-Prov. Profits Provisions Other Inc Other Exp. Exceptionals Associate Pre-tax Tax Minorities Attributable Income
(3,614) (3,918) (4,276) (4,668) 4,450 5,009 5,719 7,000 (409) (756) (1,047) (1,394) 442 157 0 0 0 0 0 0 124 79 81 82 4,607 4,489 4,752 5,687 (588) (615) (677) (810) (210) (202) (222) (266) 3,809 3,672 3,853 4,611
Per Share Data SGD EPS DPS Payout Book value Fully Diluted Shares PPOP per share Key Balance sheet S$ in millions Net Loans LLR Gross Loans NPLs Investments Other earning assets Avg. IEA Goodwill Assets
FY12 1.56 0.56 35.9% 12.76 2,444 1.84 FY12 210,519 (3,309) 213,828 2,627 63,110 25,982 311,245 0 353,033
FY13 1.49 0.58 39.0% 13.47 2,472 2.05 FY13 248,654 (3,527) 252,181 2,882 62,209 26,351 344,569 0 402,008
FY14E 1.56 0.60 38.6% 15.54 2,478 2.32 FY14E 271,195 (4,574) 275,769 3,512 67,186 28,459 392,001 0 441,330
FY15E 1.83 0.64 35.0% 16.43 2,521 2.78 FY15E 297,273 (5,969) 303,241 4,753 72,561 30,736 432,833 0 485,867
Deposits Long-term bond funding Other Borrowings Avg. IBL Avg. Assets Common Equity RWA Avg. RWA
253,464 34,610 10,761 287,904 346,940 31,574 215,591 214,657
292,365 42,231 11,551 321,117 377,521 33,430 238,081 226,836
322,607 47,486 12,706 345,298 421,669 39,222 264,798 251,439
356,526 53,575 13,977 382,295 463,598 42,189 291,520 278,159
Growth Rates FY16E 1.9% Loans 93.8% Deposits 1.7% Assets Equity 8,945 RWA 4,815 Net Interest Income 2,742 Non-Interest Income 1,448 of which Fee Grth Revenues 13,760 Costs Pre-Provision Profits (5,096) Loan Loss Provisions 8,664 Pre-Tax (1,842) Attributable Income 0 EPS 0 DPS 84 Balance Sheet Gearing 6,906 Loan/deposit (984) Investment/assets (323) Loan/Assets 5,600 Customer deposits/liab. LT debt/liabilities FY16E Asset Quality/Capital 2.18 Loan loss reserves/loans 0.68 NPLs/loans 31.1% Loan loss reserves/NPLs 17.61 Growth in NPLs 2,565 Tier 1 Ratio 3.39 Total CAR FY16E Du-Pont Analysis 333,372 NIM (as % of avg. assets) (7,810) Earning assets/assets 341,183 Margins (as % of Avg. Assets) 6,876 Non-Int. Rev./ Revenues 78,365 Non IR/Avg. Assets 33,195 Revenue/Assets 479,708 Cost/Income 0 Cost/Assets 536,838 Pre-Provision ROA LLP/Loans 394,962 Loan/Assets 60,648 Other Prov, Income/ Assets 15,374 Operating ROA 424,199 Pre-Tax ROA 511,352 Tax rate 46,012 Minorities & Outside Distbn. 322,103 ROA 306,811 RORWA Equity/Assets ROE
FY12 8.6% 12.5% 3.6% 10.6% 0.9% 9.5% 0.7% 2.4% 6.3% 9.4% 3.9% (39.1%) 23.4% 25.5% 24.7% 0.0% FY12 83.1% 17.1% 59.2% 79.9% 14.4% FY12 (1.5%) 1.3% 113.9% (0.5%) 14.0% 17.1% FY12 1.7% 89.7% 1.5% 34.5% 0.8% 2.3% 44.8% 1.0% 1.3% (0.2%) 59.2% 0.2% 1.2% 1.3% 12.8% 1.2% 1.1% 1.8% 8.7% 12.7%
FY13 FY14E FY15E FY16E 17.9% 9.4% 10.0% 12.5% 15.3% 10.3% 10.5% 10.8% 13.9% 9.8% 10.1% 10.5% 5.9% 17.3% 7.6% 9.1% 10.4% 11.2% 10.1% 10.5% 5.4% 14.1% 17.7% 19.6% 20.8% 8.4% 15.0% 15.0% 19.4% 10.0% 15.0% 15.0% 10.7% 12.0% 16.7% 17.9% 8.4% 9.1% 9.2% 9.2% 12.6% 14.2% 22.4% 23.8% 84.8% 38.5% 33.1% 32.1% (2.6%) 5.9% 19.7% 21.4% (3.6%) 4.9% 19.7% 21.4% (4.7%) 4.7% 17.6% 19.4% 3.6% 3.4% 6.7% 6.3% FY13 85.0% 16.6% 61.7% 80.1% 11.3% FY13 (1.4%) 1.2% 124.1% 9.7% 13.7% 16.3% FY13 1.6% 91.3% 1.5% 37.6% 0.9% 2.4% 43.9% 1.0% 1.3% (0.3%) 61.7% 0.1% 1.1% 1.2% 13.7% 1.0% 1.0% 1.6% 8.6% 11.3%
FY14E 84.1% 15.3% 62.6% 80.2% 11.7% FY14E (1.7%) 1.2% 126.7% 21.9% 13.3% 15.6% FY14E 1.6% 93.0% 1.5% 36.4% 0.9% 2.4% 42.8% 1.0% 1.4% (0.4%) 62.6% 0.0% 1.1% 1.1% 14.2% 0.4% 0.9% 1.5% 8.6% 10.6%
FY15E 83.4% 15.1% 62.4% 80.4% 11.9% FY15E (2.0%) 1.4% 127.5% 35.3% 13.1% 15.2% FY15E 1.7% 93.4% 1.6% 35.9% 0.9% 2.5% 40.0% 1.0% 1.5% (0.5%) 62.4% 0.0% 1.2% 1.2% 14.2% 0.0% 1.0% 1.7% 8.8% 11.3%
FY16E 84.4% 14.8% 63.0% 80.5% 12.2% FY16E (2.3%) 1.8% 118.5% 44.7% 13.0% 15.0% FY16E 1.9% 93.8% 1.7% 35.0% 0.9% 2.7% 37.0% 1.0% 1.7% (0.6%) 63.0% 0.0% 1.3% 1.4% 14.2% 0.0% 1.1% 1.8% 8.6% 12.7%
Source: Company reports and J.P. Morgan estimates.
17
Asia Pacific Equity Research 05 April 2014
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
JPM Q-Profile DBS Group Holdings Ltd (SINGAPORE / Financials) As Of: 04-Apr-2014
[email protected]
Local Share Price
Current:
16.41
25.00
12 Mth Forward EPS
Current:
1.62
2.00 1.80
20.00
1.60 1.40
15.00
1.20 1.00
10.00
0.80 0.60
5.00
0.40 0.20
16%
12Mth fwd EY
Current:
Singapore BY
10%
Implied Value Of Growth*
Current:
Oct/13
Mar/13
Jan/12
Aug/12
Jun/11
Apr/10
Nov/10
Sep/09
Jul/08
Feb/09
Dec/07
Oct/06
May/07
Mar/06
Jan/05
Aug/05
Jun/04
Apr/03
Nov/03
Sep/02
Jul/01
Feb/02
Dec/00
Oct/99
May/00
0.00 Mar/99
Oct/13
Mar/13
Jan/12
Aug/12
Jun/11
Apr/10
Earnings Yield (& local bond Yield)
Nov/10
Sep/09
Jul/08
Feb/09
Dec/07
Oct/06
May/07
Mar/06
Jan/05
Aug/05
Jun/04
Apr/03
Nov/03
Sep/02
Jul/01
Feb/02
Dec/00
Oct/99
May/00
Mar/99
0.00
-46.89%
0.80
Proxy
14%
0.60
12%
0.40
10%
0.20 0.00
8%
-0.20
6%
-0.40
4%
-0.60
2%
-0.80
Current:
11.13
14.00
Oct/13
Mar/13
Jan/12
Aug/12
1.2x
Dividend Yield (Trailing)
Current:
Oct/13
Mar/13
Aug/12
Jan/12
Jun/11
Nov/10
Apr/10
Sep/09
Feb/09
Jul/08
Dec/07
May/07
Oct/06
PBV Forward
Mar/06
Aug/05
Jan/05
Jun/04
Nov/03
Apr/03
Sep/02
Feb/02
Jul/01
Dec/00
Jun/11
Nov/10
Apr/10
Sep/09
Jul/08
Feb/09
Dec/07
Oct/06
May/07
Mar/06
Jan/05
Aug/05
Jun/04
Nov/03
Apr/03
Sep/02
Jul/01
Dec/00
May/00
Feb/02
Current: PBV hist
Mar/99
Oct/13
Mar/13
Aug/12
Jan/12
Jun/11
Nov/10
Apr/10
Sep/09
Feb/09
Jul/08
Dec/07
May/07
Oct/06
Mar/06
Aug/05
Jan/05
Jun/04
Nov/03
0.0x
Apr/03
0.5x
0.0x Sep/02
1.0x
5.0x
Feb/02
1.5x
10.0x
Jul/01
2.0x
15.0x
Dec/00
2.5x
20.0x
May/00
3.0x
25.0x
Oct/99
30.0x
Mar/99
3.5x
ROE (Trailing)
Oct/99
Price/Book Value
35.0x
May/00
10.2x
Mar/99
Oct/13
Mar/13
Aug/12
Jan/12
Jun/11
Current:
-1.00
Oct/99
PE (1Yr Forward)
Nov/10
Apr/10
Sep/09
Feb/09
Jul/08
Dec/07
May/07
Oct/06
Mar/06
Aug/05
Jan/05
Jun/04
Nov/03
Apr/03
Sep/02
Feb/02
Jul/01
Dec/00
May/00
Oct/99
Mar/99
0%
1.71
10.0 9.0
12.00
8.0
10.00
7.0 6.0
8.00
5.0
6.00
4.0
4.00
3.0 2.0
2.00
1.0 Oct/13
Mar/13
Aug/12
Jan/12
Jun/11
Nov/10
Apr/10
Sep/09
Feb/09
Jul/08
Dec/07
May/07
Oct/06
Mar/06
Aug/05
Jan/05
Jun/04
Nov/03
Apr/03
Sep/02
Feb/02
Jul/01
Dec/00
May/00
Oct/99
Oct/13
Mar/13
Aug/12
Jan/12
Jun/11
Nov/10
Apr/10
Sep/09
Feb/09
Jul/08
Dec/07
May/07
Oct/06
Mar/06
Jan/05
Aug/05
Jun/04
Apr/03
Nov/03
Sep/02
Jul/01
Feb/02
Dec/00
Oct/99
May/00
Mar/99
Mar/99
0.0
0.00
Summary DBS Group Holdings Ltd SINGAPORE Financials 12mth Forward PE P/BV (Trailing) Dividend Yield (Trailing) ROE (Trailing) Implied Value of Growth
31801.35 52.02814 SEDOL 6175203 Banks Latest Min 6.61 10.16x 0.70 1.17x 0.00 1.71 3.51 11.13 -0.85 -46.9%
Max 29.20 2.96 8.58 13.00 0.66
Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs
18
Median 12.50 1.30 2.71 10.36 0.03
Average 13.40 1.41 2.82 9.66 0.03
2 S.D.+ 20.41 2.16 5.85 15.15 0.60
2 S.D. 6.38 0.65 -0.21 4.18 -0.55
% to Min -35% -41% -100% -69% -81%
As Of: Local Price: EPS: % to Max % to Med 187% 23% 152% 11% 402% 59% 17% -7% 242% 106%
* Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)
4-Apr-14 16.41 1.62 % to Avg 32% 20% 65% -13% 105%
Asia Pacific Equity Research 05 April 2014
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention.
Important Disclosures
Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: DBS Group Holdings.
Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: DBS Group Holdings.
Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: DBS Group Holdings.
Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-securities-related: DBS Group Holdings.
Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking DBS Group Holdings.
Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from DBS Group Holdings.
Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from DBS Group Holdings. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan– covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected].
DBS Group Holdings (DBSM.SI, DBS SP) Price Chart
OW S$25 36 OW S$24.1
OW S$11 OW S$20
OW S$24.8 OW S$29
OW S$12.5 OW S$16.5
OW S$18.8
OW S$18
OW S$18.5OW S$17.2 OW S$20
27 OW S$23.1 OW S$25.3
OW S$20 OW S$14
OW S$19OW S$24OW S$20 OW S$17 OW S$17.7 OW S$19.3
Price(S$) 18
9
0 Oct 06
Apr 08
Oct 09
Apr 11
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Oct 06, 2006.
Oct 12
Apr 14
Date
Rating Share Price Price Target (S$) (S$)
06-Oct-06
OW
17.58
23.10
05-Jan-07
OW
19.39
24.80
16-Feb-07 OW
19.74
24.10
06-May-07 OW
19.65
25.30
27-Jul-07
OW
19.31
29.00
31-Aug-07 OW
17.24
25.00
28-Oct-08
OW
8.79
20.00
22-Dec-08 OW
8.49
12.50
16-Feb-09 OW
8.20
11.00
29-May-09 OW
11.60
14.00
08-Aug-09 OW
12.84
16.50
13-Nov-09 OW
14.12
20.00
09-May-10 OW
14.36
19.00
01-Aug-10 OW
14.60
18.00
19-Jan-11
OW
14.62
24.00
03-Sep-11 OW
13.15
20.00
11-Feb-12 OW
13.55
17.00
28-Apr-12
OW
14.00
18.50
08-Jan-13
OW
14.80
17.70
06-Feb-13 OW
14.96
17.20
03-May-13 OW
16.76
18.80
27-Jun-13
15.50
19.30
OW
19
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 05 April 2014
02-Aug-13 OW
16.70
20.00
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com. Coverage Universe: Modi, Harsh Wardhan: AMMB Holdings (AMMB.KL), Banco de Oro (BDO.PS), Bank Central Asia (BCA) (BBCA.JK), Bank Danamon (BDMN.JK), Bank Negara Indonesia Persero (BBNI.JK), Bank Rakyat Indonesia (BBRI.JK), Bank of the Philippine Islands (BPI) (BPI.PS), Bursa Malaysia Bhd (BMYS.KL), CIMB Group Holdings (CIMB.KL), DBS Group Holdings (DBSM.SI), East West Banking Corporation (EW.PS), Hong Kong Exchanges & Clearing (0388.HK), Hong Leong Bank (HLBB.KL), Maybank (Malayan Banking) (MBBM.KL), Metropolitan Bank (MBT.PS), OCBC Bank (OCBC.SI), PT Bank Mandiri Tbk. (BMRI.JK), Philippine National Bank (PNB.PS), Public Bank (F) (PUBMe.KL), RHB Capital (RHBC.KL), Security Bank Corporation (SECB.PS), Singapore Exchange (SGXL.SI), United Overseas Bank (UOB) (UOBH.SI) J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2014 J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients*
Overweight (buy) 44% 58% 45% 78%
Neutral (hold) 44% 49% 48% 67%
Underweight (sell) 11% 40% 7% 60%
*Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.
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20
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 05 April 2014
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Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 05 April 2014
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