Thursday 13 February 2020

Is DBS really expensive?



For more than a year, I have been thinking that DBS is expensive, the high PB ratio is holding me back. I started investment in late 2015 and in 2016 bought 100 shares of DBS at $13.64 and sold at $20.76. It is not possible to get this low price anymore unless there is a 50% crash. Price of DBS has been hovering between $24 and $26 for a year now. 




If we compare the 3 banks, they have similar  PE,  Price/Cash Flow and ROE, so the price deviation  between the banks should not be too much. I can say the banks are at fair value, yet DBS is trading 30%  above valuation.

From the table, it seem that OCBC and UOB has deviate from its historical PB ratio. The PB ratios, does this mean DBS need less assets than OCBC and UOB to generate the same PE? Of the 3 banks, DBS will have more room to fall compare to the other 2.



And so, the 3 banks are at fair value , however DBS will be more volatile with more rooms to fall during a correction. The above reason and a higher PB ratio had been holding me back to buy DBS. I decided to nibble today after another good result and an increase of dividend. Finger crossed CONVID-19 virus may bring it down to 0.8x PB?







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