Category Archives: DBS

Market psychology – Are we at the market bottom?

Many people seemed to believe that the market is low now because we tend to anchor the stock price at where the stock price is at its maximum. Just a few months ago, it was 3500 on the STI and now we are at 3050. DBS, a good proxy for the local economy, was recently at its high around $21.50 a few months ago. Right now, it is trading at $18.70 and it appears sufficiently low  to buy. After all, the difference is a whopping $2.80 per share. But things have changed. The economic fallout in China and the falling currencies in ASEAN countries will shift the fundamentals leading to the steep fall the share price. Brace tight! The market has not bottom out yet. It should undershoot(1).

(1) See investing psychology on Building Wealth Together Through Stocks.

(Brennen Pak has been a stock investor for more than 26 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via www.investingnote.com.

 

 

DBS- script dividend is out of money

DBS announced the script dividend of $0.60 per share at a conversion of $20.99 per share. This was established during the book clourse around the end April 2015. In the month of May 2015, the share price had been higher than $21 per share for the first half of May 2015, but of late if has slide below $21.00. With the script dividend conversion rate of $20.99, it should be out of money if the shareholders chose to take script dividend and held till today. Given that DBS does not give discount to entice shareholders to take script dividend, I still prefer to take cash, and when the opportunity is right, to use the cash dividend to buy shares from open market at a much lower price. In this way, I would not have odd lots of shares and at the same time enjoys an opportunity to buy DBS shares at a lower price.

Slide33

Perhaps, it’s high time that DBS should consider a discount when distributing script dividend and, more importantly, to increase its dividend payout given that dividend has been flattish for a long, long time. With the increasing share price, the dividend yield is dwindling fast. The dividend of $0.60 over a share price of about $21 per share puts the dividend yield below 3%.

(Brennen Pak has been a stock investor for more than 25 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via www.investingnote.com.

Singapore banks – Net interest margins (NIM)

Much fanfare has been thrown on banks’ net interest margin (NIM) as the impending interest rates hike seemed to gain traction. As it is, our interest rate lags behind the US interest rates, and it is only a matter of time that our interest rates go upwards as well. As banks are in the business of lending, it is natural that the banks are the likely beneficiaries of interest rate hikes. This leads to an active interest in the bank shares in Q4 2014. The share price of the local bank, namely, DBS, OCBC and UOB were up between 7.4% and 11.8%.

 Slide35

Predictably, in the months that followed, the 3-month SIBOR were increasing. In March 2015, the 3-month SIBOR hit 0.9% and then 1.02% in April 2015. However, as of 29 May 2015, the last trading day of May 2015, the 3-month SIBOR was only at 0.83%. Even though the quarterly financial results of our banks showed significant increase both on y-o-y and q-o-q bases, the NIM were actually quite disappointing for DBS and OCBC. OCBC’s NIM reduced by 5bp on q-o-q and 8bp on y-o-y. DBS’s NIM increased by 3bp y-o-y, but dropped by 2bp q-o-q. This bagged a question whether the interest rate hike is really gaining traction, or it is too early to tell.

Here are the possible outcomes with the interest rate hikes:

a.   The existing borrowers of bank loans such as the business and individual borrowers are subject to higher loan rates, which effectively benefit the banks. It is possible that these borrowers look for alternative sources of funds, but sources are limited as general interest rate environment increases.

b.   New borrowers have less propensity to borrow, as the interest payments become more costly. There may also be some pockets of borrowers who decide cash out their assets or to sell out other assets to pay off their loans, thus causing a net decrease in borrowing. There may even be possible that some cash-rich borrowers decide to reduce their cash holdings to redeem their loans.

c.   The impending interest rate hike may put off borrowings of some ‘marginal borowers’, thus causing the banks’s net borrowing to decrease. This may have resulted in the decrease in the 3-month SIBOR. However, it may be too early to tell at this moment.

d.   The interest hike may result in more non-performance loans (NPL) which negate the benefits of the interest rate hike for the banks.

The valuation of DBS is included in the latest book – “Building Wealth Together Through Stocks”. The methodology can be read across to other banks. 

(Brennen Pak has been a stock investor for more than 25 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via www.investingnote.com.

DBS – the XD price drop suggests potential upside

DBS stock went XD on Monday, 27 April 2015. The stock price fell 20c when it went XD. It enjoyed 4 successful days of rises before 27 April 2015. The dividend distribution was 30c, whilst the dop was 20c. This indicates that more people are unwilling let go of DBS shares even after receiving the final dividned of 30c per share.

 Slide24

In fact, as seen from the prices rise yesterday to $20.99 and today to $21.05, it shows that investors believe there is upside potential.

 

coverblue (2)

(Brennen Pak has been a stock investor for more than 25 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”)