Speaker A
Okay, welcome all to the weekend chitchat session. Today, I want to talk about DBS and why I think it will crash to 30 Singapore dollars.
Master Green Dragon predicts DBS stock will crash 60% to SGD 30 by 2027 due to valuation and market cycles.
Key Takeaways
- DBS has a history of significant crashes during financial crises, often falling below book value.
- Current DBS valuation is historically high, signaling potential for a major price correction.
- Price-to-book ratio is a key metric for valuing DBS due to its asset-intensive banking business.
- Institutional investors are heavily shorting DBS, indicating bearish sentiment.
- Investors should consider buying DBS only when it is undervalued, around or below book value.
What the video covers
- DBS stock has historically crashed 40% or more during major financial crises over the past 30 years.
- Previous crashes include the dot-com bubble (60% drop), global financial crisis (65% drop), oil crisis (40% drop), and 2020 flash crash (40% drop).
- DBS price-to-book (P/B) multiples peaked around 2.2 times during optimistic periods and fell below 1.0 during crashes.
- Currently, DBS trades at about 2.55 times book value, higher than previous peaks, indicating overvaluation.
- The presenter predicts DBS will crash 60% to SGD 30 by the end of 2027, based on expected P/B multiple contraction to about 1.15 times book value.
- The crash is expected due to valuation, market cycles of greed and fear, and potential global bear markets impacting loan defaults and asset management fees.
- Retail investors are cautioned against buying DBS at current high valuations and advised to wait for prices at or below book value (~SGD 26).
- The video discusses institutional investor behavior, including record short selling on DBS and other banks.
- Comparison is made with other Asian markets like South Korea and Hong Kong, highlighting fund rotations and market sentiment shifts.
- The presenter emphasizes this is personal opinion and not financial advice, encouraging viewers to treat the content as educational.
Chapters
- 00:00Introduction and DBS Crash Prediction
- 00:49Historical DBS Crashes Overview
- 02:01Recent DBS Price Movements and Crash Forecast
- 02:53Valuation Metrics and Price-to-Book Analysis
- 04:35Impact of Past Crises on DBS Valuation
- 05:35Current Valuation and Future Price Target
- 06:23Reasons for Bearish Outlook and Market Risks
- 07:28Investment Strategy and Market Comparisons
- 09:49Institutional Activity and Short Selling
- 12:24Conclusion and Final Price Prediction
Full Transcript — Download SRT & Markdown
Speaker A
So I'm not spreading fear. I will prove it through facts and data. So I believe that DBS is a very popular stock among Singaporean investors. Over the past two years, the stock price has done very well. Many new investors are still
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rushing in to buy. They believe that DBS can go to 80 or even 100. So they do not know the history of DBS. Over the past 30 years, DBS has crashed four times, and every time it crashed, it had a
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decline of 40% or more. So back in the year 2000, DBS peaked at 20 Singapore dollars. That was the dot-com bubble, and it crashed 60%. By 2003, DBS traded at a low of 8 Singapore dollars, and this repeated again during
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the global financial crisis. DBS peaked at 23 Singapore dollars in 2007. Subsequently, it crashed very sharply, 65%. This was the worst crash ever for DBS. And by 2009, DBS traded back again at 8 Singapore dollars. Wow. So, it's quite crazy. So,
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in 2015, we had the oil crisis. So, DBS peaked at 20 Singapore dollars and crashed 40%. In 2016, DBS reached a low of 12 Singapore dollars. And in 2020, we had the flash crash due to the virus and due to the
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lockdown. So DBS went from 28 Singapore dollars down to 16 Singapore dollars, a crash of 40%. So I believe in this coming crisis, we have already seen the peak of DBS at 79 Singapore dollars. I believe that DBS could easily crash 60%
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to 30 Singapore dollars by the end of 2027. And why does this happen? It is valuation and a cycle between greed and fear. So when the market is rallying, investors turn greedy. They only see the positive.
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They are so optimistic. They think that DBS, our national bank, will never fail, will never disappoint, is invincible.
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So during the dot-com bubble in the year 2000, it reached a peak price-to-book multiple of 2.2 times. And when the US market crashed due to the tech bubble exploding, it dragged down the Singapore market. So the Singapore market and the
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US market is highly correlated. And DBS fell to 0.9 times price-to-book. So I would say that price-to-book is the best way to value DBS because banks basically, they are interest income businesses. It's very
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asset intensive, and that's 2/3 of DBS revenues. One third of their business is more asset light, which is like wealth management, credit card, insurance as such, but the bulk of their business is still capital intensive. That's why we
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still look at book value. And in the 2007 global financial crisis, DBS peaked at a price-to-book multiple of 2.2 times, and it crashed to as low as 0.6 times book value. So what happened then was that
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the US had the subprime crisis. Many of these homeowners defaulted on their loans. The US banks got hit. Lehman Brothers went bankrupt. Citibank went from $50 to $1. So that was how crazy it was. And our Singapore banks
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were not spared. And in 2015, we had the oil crisis. We saw oil prices at very low, record lows, and a lot of oil-related companies, the oil and gas industry, which is very cyclical, saw a record amount of defaults, and the banks were lending
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to these companies, and there were worries of bad loans. So DBS peaked at 1.4 times book value, and at the bottom, it went to 0.9 times book value. Then the most recent crash is 2020, where we saw the peak at 1.44 times book value, and very sharply it went to
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0.85 times price-to-book value. So you can notice that in the past four crashes, DBS tends to trade below one times book value during a crisis, during a crash, and DBS trades as high as 2.2 times book
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value when there is maximum optimism. And this time around in this cycle, I would say that DBS traded at an even higher multiple. It reached a peak price-to-book value of over three times. In case you don't know, currently the price-to-book
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value of DBS is about 2.55. I predict that the book value will be about 26 Singapore dollars for 2022.
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So my assumption is that DBS could fall from over three times book value to 1.15 times book value. That will give DBS a target price of 30 Singapore dollars. Do note that I'm just a layman, an ordinary Singaporean sharing on YouTube.
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This is not financial advice. Please treat this as education and entertainment only. So I expect DBS to reach 30 Singapore dollars by the end of 2027.
Speaker A
So I'm very pessimistic. I'm very bearish on DBS. So the thing is that a lot will tell you that this time is different or DBS is no longer just borrowing and lending money. They are now an asset-light business. They're very
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focused. They are very strong in wealth management. But what if there's a global bear market? What if stock markets are declining? Bond markets are crashing, and there's less assets to manage than the assets under management contract, and there are less fees? What if the IPO
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boom is over? What if there are more loan defaults happening? Like in Singapore, we already see some of these have started to go bankrupt. Last year was Autobahn, the car rental company. This year is like the gym fitness yoga, I
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think it's called True Fitness, also went bankrupt. So they have multiple chains, you know, so it's not really that small of a company. Yeah. So I have a strong reason to believe that DBS has peaked already at 79
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Singapore dollars. So this is a huge lesson for new retail investors. Those that bought DBS above 70 Singapore dollars might not see this price again until maybe years later. So what price would I go in to bargain hunt DBS?
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So personally, for me as a value investor, as a contrarian, I like to buy great companies when they are undervalued. So no doubt DBS is a great company with strong fundamentals. The issue is that sentiment has been too
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optimistic. Valuation has been too overvalued and more than three times book value. I will only consider buying DBS at one times book value or lower. No crash, no buy. So I will only buy DBS at 26 Singapore dollars or lower. If it happens, I
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buy. If it doesn't happen, then it doesn't matter to me. Got sale, then buy. No sale, don't buy. For now, I actually am more focused on the Hong Kong market. For example, the MSCI China index is only trading at 10 times
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earnings, a PE ratio of 10 times, which is like a historical low. So, I believe that there's also a chance that funds have started to rotate. So, you can see that among the Asian markets, right, funds are jumping around. Previously,
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the South Korean market was doing very well. So institutional investors bought SK Hynix and Samsung. Then subsequently, we saw the sharp sell-down. Institutional investors took profits and they left the South Korean market, and South Korean retail investors got burned. We saw a
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40% decline in the KOSPI within just one month. And now the KOSPI is trading sideways, and the trading volume actually plunged by, I think, 70 or 80%. So now there's very low interest by institutional and international
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investors in the South Korean market. The ones that are holding the remaining shares are the local retail investors. So same thing for the Singapore market. Over the past two years, institutional investors have been coming in. They keep pushing up the Straits
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Times Index. We went from 2,800, 3,000 points to almost 5,700, 5,800 points. Then everyone was shouting for 6,000 points. So I don't think we are going to touch 6,000 points. We have reached a turning point. So is there a
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chance that the Singapore market might look like the South Korean market and it comes down sharply? The answer is yes.
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You can see that from Wednesday trading, OCBC plunged 6%. Then Thursday, the three banks each plunged 5%. So this kind of sell-down is definitely not normal, and it's also not done by retail investors. It's clearly
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institutional investors doing the trade. So what happened is that, like what I shared with the members, there is a record amount of short selling. The short selling volume is seven times normal than the average normal amount.
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institutional investors doing the trade. So what happened is that like what I shared with the members is that there's a record amount of short selling. the short selling volume is seven times normal that than the uh the average
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normal amount of short selling. Short selling is usually done by institutional investors because they are the ones that have a SBL account securities borrowing and lending. Typically retail investors like you go to your discount broker you want to short you cannot short you
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because you don't have the SBL account. So how does uh SB work is that these institutional investors they will borrow the shares. So so there's a cost to borrowing. You need to pay interest to the owner of these shares. So
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[clears throat] they borrow the shares already. Then they will sell at market price. They dump the shares at market and once the they sell already then they owe the shares. Then once the price have declined 20 or even 30%, they buy back
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the shares at a lower price. Then they return the shares to the owner. So that's how short selling works in the Singapore market.
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And now we are seeing record amount of short selling on the three big banks. uh just on Thursday alone short selling on DBS was 34% of all short selling volume. So DBS is the one that is most heavily shorted
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because DBS is the one that is most overvalued. So do continue to see that the banks continue to trend downwards.
Speaker A
It won't be one straight line down. So there might be some rebound but but that that will be a trap. I believe that uh looking at the big picture I think by mid of next year I would say that uh
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over the next nine months we [clears throat] we could see DBS trending towards $30 Singapore dollars.
Speaker A
That's my personal view. I may be wrong and I think many people will hope that I'm wrong that if I'm wrong then uh [clears throat] good for you. Good for you. Yeah. So I'm just sharing my personal experience and like what I
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share through the data over the past uh 30 years DBS has crashed four times and when it crashes usually the decline is between 40 to 65%.
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So this time around I don't think it will crash as much as the global financial crisis where we saw a 65% decline. I think it it could be a 60% decline to uh 30 Singapore dollars. So I'm not saying that DBS is going
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bankrupt. So fundamentally uh DBS will continue to shrive fundamentally that is still solid for the long term but be prepared that uh earnings might take a hit like what analyst mentioned is due to the marktomarket losses in their bond
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portfolio. So we see that globally now uh bond yields are rising that means bond prices are coming down. So the bond portfolio held in their balance sheet they have to market lower. So this will lead to short-term paper losses and
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their earnings could be hit and one thing the retail investors mistake is that uh they think that DBS the dividend or is almost 100% uh sure to get or even guaranteed. So, so in history there was quite a number of times where DBS
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actually reduced their dividends. So, like during the global financial crisis and uh DBS reduced their dividends by 20%. Because earnings came down sharply and in 2020 the the lockdown virus period DBS also reduced by their dividends by 20%. So this time around
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don't be surprised in 2027 we might see a dividend cut of 10 to 20%. So don't be surprised by that.
Speaker A
Yeah. So that's all my sharing on DBS today. Have a good weekend. Take care.
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The power.
Topics:DBSstock crashprice-to-book ratioSingapore stock marketfinancial crisisvalue investingshort sellingmarket cyclesinvestment strategyMaster Green Dragon
