DBS Group - RHB Invest 2023-06-23: Economic Headwinds, Above Mean Valuation

• Against the backdrop of a weak domestic economy and an uncertain global economic outlook, and an above-mean valuation of 1.4x P/BV, DBS's share price will likely be range-bound in the near term.
• - Read this at SGinvestors.io -
• Although the latest S$2.3m penalty imposed by the Monetary Authority of Singapore (MAS) will have an immaterial impact on earnings, this once again highlights DBS’ operational shortcomings.

Economic outlook darkens.

• Singapore’s non-oil domestic exports (NODX) fell by a sharper-than-expected 14.7% y-o-y in May, resulting in a NODX contraction of 14.6% for Jan-May 2023. RHB economists expect 2Q23 GDP to contract by 1.4% y-o-y, and heightening risks of a technical recession in 1H23.
• - Read this at SGinvestors.io -

Lower FY24-25F earnings forecast for DBS

• We believe the weak economic outlook could lead to businesses staying cautious into the early part of 2024. A review of our forecasts led to earnings cuts of 9.6% for DBS in FY24F and 11.6% for FY25F. Our FY23 earnings estimate is unchanged, with support coming mainly from still healthy NIM.
• The FY24-25F revisions take into account assumptions of lower NIMs, slightly higher credit costs and a higher effective tax rate – given management’s guidance for higher taxes under the Base Erosions and Profit Sharing 2.0 rules.
• Overall, we expect DBS's net profit to dip by 3% y-o-y in FY24F, before rising 4% y-o-y in FY25F.

Hit by another MAS penalty.

• Read more at SGinvestors.io.

Singapore Research RHB Securities Research | https://www.rhbgroup.com/ 2023-06-23 SGinvestors.io

---