Is it time to stock up on cheap DBS stocks?

Valuations are unjustifiably low, analysts say.

Now might be a good time for investors looking to snap up banking stocks in Singapore. DBS, the city-state’s largest bank by market capitalisation, is currently trading at valuations last seen during the 2011 European Debt Crisis and 2008 Financial Crisis, according to a report by OCBC.

OCBC believes that the bank’s recent share price decline is due to market concerns of an economic slowdown in the region and the impact on profitability and impairment charges.

However, the sell-down appears overdone, as DBS’ non-performing loan ratio remained stable as of its last quarterly results while impairment charges rose only marginally to $496m.

“We believe the current low valuation is not warranted given that there is no indication of impending huge potential corporate defaults or business failures. While growth is slowing and challenges remain, we believe that DBS should still be able to sustain its profitability. In addition, for the longer term investors, divided yield of almost 4% is still decent,” OCBC said.

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