UOBKH rates top pick DBS a ‘buy’ on 5.6% yield
https://www.businesstimes.com.sg/co...inance/uobkh-rates-top-pick-dbs-buy-5-6-yield
[SINGAPORE] A dividend yield of 5.6 per cent this year has led UOB Kay Hian (UOBKH) analysts to upgrade DBS : D05 +0.57% to a “buy” call, with the broader banking sector expected to benefit from sustainable economic expansion and low inflation.
In a note on Wednesday (Jan 7), UOBKH analyst Jonathan Koh said the global backdrop of a so-called “Goldilocks economy” is set to deliver steady growth and stable asset quality in 2026.
The banking sector, in particular, is set to provide “attractive value” with a “low” price-to-book ratio of 1.65 times and a “high” dividend yield of 4.8 per cent.
“Our top pick is DBS,” said Koh, setting a target price of S$68.95. “We also like OCBC : O39 +1.01% for its focus on trade and investment flows within Asean and a defensively low 2026 forecast price-to-book ratio of 1.45 times.”
DBS’ quarterly dividend per share is expected to increase by S$0.06 to S$0.66, starting in Q4 FY2025.
The analyst noted that rumours of the lender’s
profit-boosting acquisition of Vertical Theme’s 29.1 per cent stake in Alliance Bank Malaysia has set the stock market abuzz. The stake is worth about RM2.5 billion (S$790.5 million), based on Alliance Bank’s market value.
Vertical Theme is a joint venture, 49 per cent owned by Singapore investment company Temasek and 51 per cent owned by Malaysia’s investment vehicle Langkah Bahagia. The potential acquisition could be “comfortably financed” through internal cashflow, said Koh.
Overall, Singapore banks were deemed as “attractive yield plays” on the back of a low-interest rate environment in Singapore, with the sustainability of their dividend payouts supported by resilient earnings, strong capital adequacy and discipline in capital management.
Koh also noted that the banks offer yield spreads – the premium investors earn over risk-free rates – that are well above historical averages. DBS offers a higher spread of 3.5 per cent, and OCBC has a 2 per cent spread.