Astin said:
Any 1 of the 3 local banks...
From Daiwa which has a outperform for DBS:
Investment summary
We maintain our 2 (Outperform) rating on DBS Group (DBS), our top pick in the
Singapore banking sector, and have raised our six-month target price to S$19.00 (from
S$17.80) based on a 2006 PER objective of 13.8x, the current average of its peers.
Fundamentals
· We have not changed our target-price methodology, based on a 2006 PER parity
with the average of United Overseas Bank (UOB) (UOB SP, S$14.60, 3) and
Oversea-Chinese Banking Corp (OCBC) (OCBC SP, S$6.55, 3). This target reflects
our positive view that DBSs industry-leading earnings growth of 20% YoY (Daiwa
forecast) next year (versus our forecasts of growth of 10% YoY for OCBC and 2%
YoY for UOB) will wipe out its current 2006 PER discount to the rest of the sector.
· We have observed that the average PER of UOB and OCBC, based on our 2006
forecasts, has improved gradually and stabilised at 13.8x since their 3Q05 results
announcements, up from 12.9x on 28 October 2005, when we last pegged DBSs
target price.
· We expect some minor distortions in the GAAP EPS and cash-EPS ratios for DBS
following its announcement on 30 November of the sale and leaseback (for an
initial period of eight years) of its DBS Building office complex for S$690m. DBS
will recognise a gain of S$300m in 4Q05, and defer a S$150m capital gain, which
will be amortised over the eight-year-lease period, according to the company.
· However, our forecast for core-EPS growth (excluding the S$300m gain in FY05
from the building disposal) of 20% for FY06 has not changed. In line with
managements guidance, we expect the transaction to be EPS neutral from 2006, as
annual interest income from the cash proceeds and the amortisation of the
remaining S$150m capital gain will be just enough to offset higher leasing expenses
and the loss of rental income.
