Purchase of DBS Group Holdings

 

DBS logoOn 10/02/16, I picked up some shares in DBS Group Holdings at an average price of $13.34 a share. However, I was not able to blog about this trade due to work.

This was just before it announced strong results, with a 12% increase in net profit from 2014. With a NAV of $15.82, DBS was trading at a discount in PB of 0.843 at my purchase price. Local banks rarely trade at discount in their PB ratios, especially since they are regarding one of the safest in the world, and produce ROAs above 1. DBS specifically has tier ratios of 13.5%,13.5% and 15.4% which are higher than the required Common Equity Tier 1 (CET1) CAR of 6.5%, Tier 1 CAR of 8%, and Total CAR of 10%. These CARs measure a bank’s ability to absorb losses; the higher the ratios, the thicker the cushion. In fact, DBS remained profitable during the Great Financial Crisis in 2009, while other international banks became insolvent. I chose DBS over the OCBC and UOB due to its larger discount in its NAV, although OCBC remains attractive as well. At my purchase price, dividends given for FY15 was $0.60, presenting a yield of 4.5%, which is decent enough for me.

DBS is one of the biggest banks in Southeast Asia, and possesses a strong franchise in in the region. I believe its brand to be enduring and will be looking at increasing my stake if prices do dip in the future.

 

Disclaimer: The author owns shares in the abovementioned company. The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.