Tuesday, 18 March 2014

DBS Group Holdings

UOBKayhian on 18 Mar 2014

FY13F PE (x): 10.5
FY14F PE (x): 9.0

Societe Generale Private Banking Asia (SGPBA) is a small acquisition to accelerate growth in DBS’s wealth management and private banking segments. It would enhance the scale of DBS Private Bank’s presence in North Asia. The acquisition is attractively priced at only 1.75% of Asset Under Management (AUM) and is expected to have a positive impact on EPS a year from completion. According to Capgemini, the population of high net worth individuals in the Asia Pacific region expanded 9.4% to 3.7m and their wealth increased 12.2% to US$12t in 2012. Wealth of high net worth individuals is projected to grow 9.8% annually to US$15.9t by 2015.

We maintain our BUY recommendation for the stock and a target price of S$21.90 is based on 1.51x P/B, derived from the Gordon Growth Model (ROE: 11.0%, required return: 7.8% and constant growth: 1.5%).

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