DBS Group Research re-initiated coverage on Dah Sing Banking Group (DSBGG)(02356) with a "hold" rating and a target price of HK$11.3.
The research house said
Focusing on POEs (Privately Owned Enterprises) and mid to small-sized companies in HK which are more exposed to the economic downcycle, DSBG expects FY2019 loan growth to be in the low single digit. As loan growth in 1H was 3% h-o-h, this implies 2H loan growth will be muted.
Amid the slowing HK economy and ongoing China-US trade dispute which is dampening investment activity, DBS has taken a conservative view on DSBG's loan growth, projecting only 2.6-2.8% in FY2020-21.
DSBG has no intention to sell its 15% stake in Bank of Chongqing (BCQ)(01963). However, as long as BCQ trades below 1x PB, DSBG would have to book an impairment allowance which has accumulated to HK$1.5bn as of 1H. BCQ has applied for A-share listing. This would ease the downside pressure on DSBG's bottomline if its materialises.
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