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Thursday, April 11, 2019

Is it time to consider selling DBS

This recent rally has been phenomenal. At last traded price (27.1), DBS has an effective yield of around 4.4%(@ $1.20 per share). 

Based on an EPS of 2.14, that represents around a 55% payout ratio, which seems reasonable and sustainable to me. 

It seems that a lot of investors may be looking to hold on to DBS at least until 2 May 2019, when the share will go XD. Once XD, the share price should theoretically correct to 26.5 (0.60 dividends).

The big question on everyone's minds is naturally: Will this seemingly unstoppable rally continue? Will we see DBS attempt to breach the $30 dollar mark again as it did prior to its catastrophic crash back to $23?

One thing to note here is that DBS net interest income grew 15% y-o-y from 7.7B in 2017 to 8.95B in 2018. With the interest rate environment now taking a U-turn, and the Fed turning dovish, will this type of NIM growth be repeated in 2019?

Given the exuberance shown in the current market, might it be worthwhile to take a slightly more contrarian approach and lock in some gains. 

DBS CEO has made it clear that he has big plans for DBS in India. I am not familiar with the banking landscape in India but if Singtel's experience is anything to go by, there would necessarily be some pain before rewards may be reaped, that is, assuming if there are any rewards at all at the end of the Indian tunnel.

Onward to FI friends!




2 comments:

  1. I think you should wait for this time. There is no need to hurry. You can sell it later.

    ReplyDelete
  2. There is no perfect time. As long as you are comfy with the gains. Nobody can foresee how long more the bull will last

    ReplyDelete