DBS Group Undervalued As Investors Fret About Macro Scenarios

DBS Group (OTCPK:DBSDF) (OTCPK:DBSDY) hasn’t had perfect quarterly reports since my last update, but the underlying performance of the bank has been better than the basically flattish performance of the share price would suggest. It’s understandable that investors are worried about the impact of higher rates on Asian economies (and borrowers) and the risk that turmoil in the Chinese property sector spreads, but that worry seems to be excessive relative to the company’s credit quality and earnings power over the next year or two.

DBS Group is always going to be a higher-risk investment than a bank like Bank of America (BAC) given the company’s exposure to multiple economies, including more volatile markets like China, India, and Indonesia, but I wouldn’t ignore the strong returns on capital that this bank has generated over full cycles, nor the efforts that the company has invested toward establishing itself as a significant digital banking presence in multiple growth markets. I believe the shares are at least 10% undervalued today and priced for a long-term total annualized return in the low-to-mid-teens.

 

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 DBS Group Undervalued As Investors Fret About Macro Scenarios