We believe the share price will rise in absolute terms over the next 30 days. This is because of an earnings release. DBS is due to announce 2Q09/ 1H09 results on Friday, August 7. We see the prospect of DBS beating the street due to lower-than-expected loan loss provisions (driven by vast injections of liquidity into China), strong non interest income (buoyant wholesale markets in addition to the ~S$200m gain from the sale of its 2.7% stake in HDFC Bank) and some unwind of recent underperformance re peers. The stock trades on 1.1x FY09e book - a 40% discount to peers. Moreover, any CEO announcement may also remove current uncertainty.
We estimate that there is about a 70% to 80% or "very likely" probability for the scenario. Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the scenario. Different time horizons drive the contrary call. We see the stock reacting to near-term earnings results rather than the prospect of a weak and shallow global recovery.
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