The recent upturn in Singapore economy led to a surge in local banks’ share price. Generally seen as the bellwether of the economy, bank stocks are extremely sensitive to economy conditions. South-East Asia largest bank, DBS, is no exception. The share price stormed to record high of $26.60, an impressive level not seen even during the boom years preceding the Great Financial Crisis.
The power surge of the share price had created much wealth for many wealth builders, including DBS CEO who bought 200,000 shares for $2.8 million in February 2016. For the man in the street, $2.8 million is lot of money. But for Piyush Gupta, his annual pay package in FY2016 was already $8.4 million. His purchase of DBS shares back then was driven by his conviction that the shares were grossly undervalued.
Indeed, his move was vindicated as the bank’s share price climbed by almost 100% within two years. If Gupta had held the shares from February 2016 till now, he would have made a profit of almost $2.8 million.
With the bullish form of the share price, it is indeed tempting to purchase DBS shares. However, it is important to review the financial performance and assess whether the price is worth the value. After all, price is what you pay and value is what you get when it comes to stock investing.
DBS financial performance 3Q2017
To be honest, the third quarter 2017 results had been disappointing for DBS, not least because of the toxic loans issued to the ailing oil and gas companies. Although it is easy to use the allowances and non-performing loans as scapegoats for the dismal performance, the management should take some blame for not diversifying the revenue sources like what OCBC had done.[The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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