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DBS Group Holdings Ltd Is Up by More Than 30% In The Last 12 Months. Is It Expensive Now?

DBS Group Holdings Ltd (SGX: D05) or DBS for short, is one of the three major banks based in Singapore, along with United Overseas Bank Ltd (SGX: U11) and Oversea-Chinese Banking Corp Limited (SGX: O39).

In the last 12 months, the bank’s market value has gained more than 30%. Given the recent price appreciation, is the bank’s valuation expensive now?

Unfortunately, there is no easy answer to this since there are many ways to look at valuation.

Still, we will try to answer the above question by comparing DBS Group’s current valuation to the market through three perspectives, namely price-to-book, price-to-earnings and dividend yield.

Here, the proxy that we will use as the market’s average valuation is the SPDR Straits Times Index ETF.

Price to book ratio (P/B)

*Source: Google Finance at price $20.44

As we can see from the chart above, price-to-book ratio for DBS Group is about 0.91 times that of the Straits Times Index ETF.

As such, assuming everything else being equal and that price-to-book ratio is used as the sole criteria for valuation, DBS Group is 9% cheaper than the market average.

Price to earnings ratio (P/E ratio)

*Source: Google Finance at price $20.44

From the chart above, we can see that DBS Group’s P/E ratio is trading at about 105% of that of the market average.

This suggest that if P/E ratio is used as a sole metric for valuation, DBS Group is trading at a 5% premium to the market average.

Dividend yield

*Source: Google Finance at price $20.44

Lastly, we will look at the dividend yield. Here, we can see that DBS Group’s dividend yield of 3.1% is on par with that of the market of 3.1%.

As we all know that dividend yield is an inverse of valuation, thus, the higher the yield, the lower the valuation.

On that basis, we can see that DBS Group is trading at valuation that is similar to the average market.

Conclusion:                  

In summary, based on what we have seen above, we may argue that DBS Group is currently priced fairly as compare to the market average.

This takes into account of its marginally lower-than-market average price to book, offset by the marginally higher-than-market average price to earnings ratio.

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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 Lawrence Nga doesn’t own shares in any companies mentioned. Fool Singapore has a recommendation for United Overseas Bank.