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A Value Investor’s Perspective Of DBS Group Holdings Ltd Right Now

DBS Group Holdings Ltd (SGX: D05) is a company that is likely to be familiar with many Singaporeans. It’s not just Singapore’s largest bank by assets, it is also one of the largest stocks in the stock market here with its market capitalisation of S$39.5 billion.

The bank’s heft also gives it an important role in Singapore’s stock market barometer, the Straits Times Index (SGX: ^STI). At the moment, DBS has a 12% weighting within the index.

Unfortunately, its size has not given DBS immunity from market turmoil. Over the last 12 months, the bank’s stock price has fallen by 24% to S$15.60 currently. For perspective, the Straits Times Index has dropped by ‘just’ 17% over the same period.

Let’s run a value investor’s lens through DBS’s business fundamentals. There are many financial metrics that value investors tend to focus on, but let’s look at just four here, namely, the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, the asset to equity ratio, and the dividend yield.

DBS has trailing earnings per share of S$1.74 (for the 12 months ended 31 March 2016). At its current share price, this gives the bank a P/E ratio of 9.0. For some context, the SPDR STI ETF (SGX: ES3) has a P/E ratio of 11.5. The SPDR STI ETF is an exchange-traded fund that mimics the fundamentals of the Straits Times Index.

As for the P/B ratio, DBS currently has a net asset value per share of S$16.39, which gives rise to a P/B ratio of 0.95. This number of less than 1 means that investors are able to get a theoretical discount on the assets of DBS, net of all liabilities.

Next, let’s look at DBS’s total assets to shareholder’s equity ratio. This ratio can be used to assess how much financial risk a bank is undertaking in its business. In general, the lower the number, the stronger a bank’s balance sheet is, and thus the lower the financial risks it is facing.

With DBS’s total assets of S$439.2 billion and shareholder’s equity of S$41.8 billion, Singapore’s largest bank has a total asset to shareholder equity’s ratio of 10.5, which is an improvement from the 11.6 seen a year ago.

Lastly, DBS has a dividend yield of 3.85% given its 2015 dividend of S$0.60 per share. The S$0.60 per share dividend was a 3.4% hike from the S$0.58 per share paid by DBS in 2014.  Over the past decade from 2005 to 2015, DBS’s ordinary dividend per share has come in a relatively tight band of between S$0.56 and S$0.71.

A Foolish Conclusion

Given all that we’ve seen above, it appears that DBS could look good to value investors; the bank has a P/E ratio that’s lower than the market average, a P/B ratio of less than 1, a leverage ratio of just 10.5, and a yield of more than 3.0%.

But, it must be noted that all these should serve merely as a starting point for investors to dig deeper into the bank.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Esjay owns shares in DBS Group Holdings.