University of Portsmouth: DBS Bank Stock Selection Report Analysis

This report, prepared for an Advanced Financial Management course, focuses on the stock selection process of DBS Bank, a multinational bank based in Singapore. It details the bank's approach to equity portfolio construction, including the investment philosophy targeting household investors and the selection of stocks from the FTSE ST ALL share index. The report outlines the process of pitching to customers, emphasizing investment themes, potential investments, and the construction of stock screens. It also delves into the intellectual foundations of the selection process, discussing portfolio investment policies and the importance of stock picking abilities. Furthermore, the report provides a description of the stock selection process, including financial fundamentals, asset utilization, and capital structure. The report uses historical data and descriptive statistics to analyze the stock selection process and concludes with a discussion on market efficiency and the challenges faced by stock investors.

Running head: ADVANCED FINANCIAL MANAGEMENT
Advance Financial Management
Name of the Student
Name of the University
Author’s Note

1ADVANCED FINANCIAL MANAGEMENT
Executive Summary
This current report has focused on the approach to overall procedure of selection of stock that
are available with the company. DBS Bank has been selected which includes the effective
pricing methods that would be effective for better analysis of the project. The study includes
the intellectual foundations of the overall process of selection that would be helpful in
selecting the robust justification of both theoretical as well as empirical literature on the
approach. The study also includes the overall description of stock selection process that
includes the live market data from the give time period.

2ADVANCED FINANCIAL MANAGEMENT
Table of Contents
Introduction................................................................................................................................3
The pitch to the customers.........................................................................................................3
The intellectual foundation of the selection process..................................................................5
A description of the stock selection process..............................................................................6
Conclusion..................................................................................................................................8
References..................................................................................................................................9

3ADVANCED FINANCIAL MANAGEMENT
Introduction
Financial management is vital for an organization as it includes the process of
managing the finances that are available for the company. Management of the finances is
directly associated with the process of allocated the equity funds that are mainly managed by
buying it into a management portfolio of the stocks. In this study, DBS Bank has been taken
into consideration, which is a multinational bank that is currently based in Singapore. The
part of the company that approves the philosophy incudes the customers that mainly aim in
household investors. The line manager has allocated the fund of nominal sum of 100000000
Singapore dollar along with constructing the equity portfolio. In this study, it includes the
report that approves the philosophy of selecting the stock that are required to be selected from
the FTSE ST ALL share index. The equity portfolio has the goal to invest in virtual along
with making investment decision for equity analysis. It includes the mechanics that are
required to be understood by the equity analysis which consist of certain mechanical elements
for constructing the equity portfolio.
The pitch to the customers
Picking up of stock is an important aspect in which the selection is directly based on
certain criteria that helps in achieving the positive return. In current economy of global, it can
be clearly seen that the equity stock includes vast amount of information that might be
difficult in overall process of investment1. DBS Bank has created an equity portfolio in which
the creation of screening process takes place by managing the number of stock that are
required for further investigation. There are different steps that might be useful for the
customers for picking up the stock, which are suitable for them.Investment theme – Some of the investors of the company mainly focuses on the
type of industry on which they are going to invest along with compelling the drivers of
growth. The information from the household might led some of the investors to build stocks
that might attract most of the customers in upcoming years2. The positive long term
fundamentals have to the theme for the equity that would attract most of the audiences along
with underpinning the management of the firms.
1 Arcand, J.L., Berkes, E. and Panizza, U., 2015. Too much finance?. Journal of Economic
Growth, 20(2), pp.105-148.
2 Bruhn, M. and Love, I., 2014. The real impact of improved access to finance: Evidence from
Mexico. The Journal of Finance, 69(3), pp.1347-1376.

4ADVANCED FINANCIAL MANAGEMENT
Analyzing potential investments – At the time of establishment of the theme, the
potential price of the stock that are comfortable with the market capitalization along with
finalizing the share price in the targeted market. Market capitalization in the share of the
market includes the effective pricing strategy that are required to be multiplied by number of
shares that are outstanding in nature along with current price of the available stock3. The
common measure of the company are mainly categorized that mainly depends on the
outstanding valuation of the stock. Most of the investors that are looking of investment in the
company mainly focuses on the large capital companies that are associated with the certain
segment of market along with participating with the modular rental companies. The potential
list of companies includes reviewing of the customers that includes their growth aspects. The
potential customers of the company focuses on the obscure segment in the targeted market
along with participation of dividend payments4. The project profitability mainly chooses the
stock that requires the importance of the financial fundamentals that includes the earnings,
operating margin and cash flow from the company.Construction of stock screen – The stock screen are required to be constructed
where several brokerage firms along with financial media are included with the availability of
information. The investment goals are required to be determined that might the customers to
the company for certain investment purposes.
The funds that are associated with the company are mainly of active funds, which
directly puts impact on the availability of the equity funds. The stocks has been chosen as the
risk return profile includes the effective system that mainly helps in identifying the list of
missed priced stocks. As per the analysis of the situation, the risk that are associated with the
equity funds of the company are generally low that would be effective for the customers to
buy the shares as well as the stock5. Therefore, the customers has the ability to understand the
procedure of underpinning the management that includes the riskiness of the stock, which are
available for the company. Active funds are the funds that are directly available to the
3 Carbo Valverde, S., Rodriguez Fernandez, F. and Udell, G.F., 2016. Trade credit, the‐ ‐
financial crisis, and SME access to finance. Journal of Money, Credit and Banking, 48(1),
pp.113-143.
4 Statman, M., 2014. Behavioral finance: Finance with normal people. Borsa Istanbul
Review, 14(2), pp.65-73.
5 Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to
finance. Strategic management journal, 35(1), pp.1-23.

5ADVANCED FINANCIAL MANAGEMENT
customers along with highlighting the mispriced stock, which might affect the overall process
of selection of equity funds.
The intellectual foundation of the selection process
One of the most effective investment policy includes the portfolio investment policy
that contains the risk that are required to be associated at special level. The adjustment of the
equity fund are consistent in nature that are required to be included with the returns for the
investors. On the other hand, the fundamentals of the company as the determinants of the
stock performance that mainly seeks in the investment of the companies, which would be
beneficial for the customers in their overall process of investment6. The price of the stock
might rise with increase in certain amount of investment along with reflecting the amount that
would be initiated for the potential investors of the company. In the investment portfolio, the
generating consistent investment generally returns the longer items, which consist of power
of compounding. The blend value of the stock picking includes the blend value that would be
initiated with the growth of the strategies that would be beneficial for the investors in the
company7. The allocation of assets has driven the portfolio in the viewpoint of the structure
products along with driving the model for overall process of allocation of assets.
The abilities of stock picking is important as the abilities to ascertain the capability of
generating the better as well as consistent returns as compared to the timings for the markets.
The company should have the capability of generating better returns from the targeted market
along with considering the pricing strategy in the themes of equity portfolio. The themes of
the equity portfolio might hedge to protect the potential downside of the investment for
effective usage of cash. The decision making for the investment has been involved by the
fund manager that has been appointed by the managers along with meeting assets of the
business. The process of decision making includes the management of the company along
with assessing the business along with size of the opportunity for potential future8. The cost
of the stock includes the possibility of beat the market that includes the direct implication for
adjusted of new market price along with pointing out the new information that are available.
It also includes the financial units that include the valuation of two years that are required to
be included in the overall process of decision making.
6 De Bondt, W.F. and Thaler, R., 1985. Does the stock market overreact?. The Journal of
finance, 40(3), pp.793-805.
7 Porta, R.L., Lakonishok, J., Shleifer, A. and Vishny, R., 1997. Good news for value stocks:
Further evidence on market efficiency. The Journal of Finance, 52(2), pp.859-874.
8 Fama, E.F., 1991. Efficient capital markets: II. The journal of finance, 46(5), pp.1575-1617.

6ADVANCED FINANCIAL MANAGEMENT
It has to be taken into consideration that at the time of buying the stock items along
with regular overview of the regular management meeting which are required to be initiated
on a quarterly basis. Analysis and of the company includes interfacing the people by the
distributors along with the suppliers for certain perspective by considering the decision
points. Buying the shares and equity at targeted price consist in the favorable condition that
are required to be maintained with the certain disposable amounts9. At the time of selling the
equity portfolio, the regular monitoring of the business is required to be considered as it
points out the faults in the business procedures that might affect the overall price of the equity
stock. The Efficiency Market Hypothesis (EMH) is the theory that highlights the price of the
assets along with reflecting the information that are available in the targeted market. The
direct implication, which is impossible to beat the market, makes the risk that are adjusted on
the basis of market along with reacting it to the fundamental analysis.
A description of the stock selection process
The stock investors might face a tough challenge for choosing the correct form of
investment along with reviewing the massive amount for the available public companies. It
includes the determining the suitable for the portfolios that requires certain quality of the
companies for effective portfolio in the equity stock10. At the time of overvaulting the stock,
it includes the effective communication about the overriding consideration about the quality
of the credit. The performing of the personal diligence includes the tougher tasks along with
evaluating the evaluating for the stock prices and evaluating the stocks. The project
profitability mainly chooses the stock that requires the importance of the financial
fundamentals that includes the earnings, operating margin and cash flow from the company.
The financial health of the company includes the stock price that highlights the effective
margins in the efficient measures of financial figures11. The figure of gauging the profitability
signifies the cash flow that might be undervalued with flow of cash.Favorable asset utilization – This is the process where the revenue for the each
assets are earned for every dollar with the available assets that are owned by the company12.
9 Jegadeesh, N. and Titman, S., 1993. Returns to buying winners and selling losers:
Implications for stock market efficiency. The Journal of finance, 48(1), pp.65-91.
10 Zingales, L., 2015. Presidential address: Does finance benefit society?. The Journal of
Finance, 70(4), pp.1327-1363.
11 Kaczynski, D., Salmona, M. and Smith, T., 2014. Qualitative research in
finance. Australian Journal of Management, 39(1), pp.127-135.
12 Piotroski, J. D. 2000. Value investing: The use of historical financial statement information
to separate winners from losers. Journal of Accounting Research, 38, pp.1-52.

7ADVANCED FINANCIAL MANAGEMENT
Different industries use different types of assets utilization process that might be useful for
the company to gain competitive advantage in both of the capital structures.Conservative structure of capital – The structure of capital is flown in the funds of
the company that uses comparative capital structure of the company along with enlisting the
both debts and equity, which are available for the company13. It also highlights the liquidity
of the company that are required to be included with certain financial expansion by increasing
the long term debts. The expansion provided in earning momentum might consider the slow
acceleration in the earnings growth for the period of time. At the time of posting, the growth
of the funds includes the projections of future earnings that increases the competitive
pressure.
The use of historical data from the day of 20 May 2019 to 8 August 2019 has been
involved in the report that might highlights the descriptive statistics of the portfolio14. FTSE
ST ALL share index has been priced around 25.86 SGD and 24.88 SGD. The price of the
share has been varying in between the above mentioned list of prices that would be used for
determining the descriptive statistics.
Figure 1: Descriptive Statistics of DBS Bank
(Source: Created by Author)
The above figure points out the descriptive statistics of DBS Bank along with other
diversified industries which points out the measurement in selection of stock of the
company15. The average of the statistics is evaluated as 25.575 which means in the selection
of stock it would be beneficial of the company in their financial year. The maximum
valuation of stock is derived at 27.01 and minimum is derived at 24.10 for the valuation as
13 Lakonishok, J., Shleifer, A. and Vishny, R.W., 1994. Contrarian investment, extrapolation,
and risk. The journal of finance, 49(5), pp.1541-1578.
14 Law, S.H. and Singh, N., 2014. Does too much finance harm economic growth?. Journal of
Banking & Finance, 41, pp.36-44
15 Malkiel, B.G., 2003. The efficient market hypothesis and its critics. Journal of economic
perspectives, 17(1), pp.59-82.

8ADVANCED FINANCIAL MANAGEMENT
well as better selection of stock16. On the other hand, other companies also hold the similar
mean, median and standard deviation which points out the diversified industries and their
descriptive statistics. The standard deviation of the selection process includes the effective
managing the resources that are associated with the business. The range of the prices includes
the pricing of stock that has been derived in the overall process of descriptive statistics is
around 2.91 over the mentioned time period17. The PE and PBR has been calculated for all of
the above mentioned companies which mainly points out the relationship between the price
of shares and other earnings per share of the business firms.
Conclusion
From the above study, it can be concluded that managing of equity fund is an
important aspect in business activities in which the equity portfolio is required to be
constructed. The fundamental approach to stock selection has been used and the stock has
been selected from FTSE ST ALL share index. The pitch to the customers includes the
philosophy that plays an important role for the overall process of selection. The information
from the household might led some of the investors to build stocks that might attract most of
the customers in upcoming years. The stocks has been chosen as the risk return profile
includes the effective system that mainly helps in identifying the list of missed priced stocks.
The intellectual foundation of selection process includes the theoretical as well as empirical
valuation that results in better outcome from the company. It can also be concluded that the
study has used the one of the most effective stock selection procedure that would be
beneficial for the company.
16 McLean, R.D. and Zhao, M., 2014. The business cycle, investor sentiment, and costly
external finance. The Journal of Finance, 69(3), pp.1377-1409.
17 https://sg.finance.yahoo.com/quote/D05.SI/history?
period1=1558290600&period2=1565202600&interval=1d&filter=history&frequency=1d

9ADVANCED FINANCIAL MANAGEMENT
References
Arcand, J.L., Berkes, E. and Panizza, U., 2015. Too much finance?. Journal of Economic
Growth, 20(2), pp.105-148.
Bruhn, M. and Love, I., 2014. The real impact of improved access to finance: Evidence from
Mexico. The Journal of Finance, 69(3), pp.1347-1376.
Carbo Valverde, S., Rodriguez Fernandez, F. and Udell, G.F., 2016. Trade credit, the‐ ‐
financial crisis, and SME access to finance. Journal of Money, Credit and Banking, 48(1),
pp.113-143.
Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to
finance. Strategic management journal, 35(1), pp.1-23.
De Bondt, W.F. and Thaler, R., 1985. Does the stock market overreact?. The Journal of
finance, 40(3), pp.793-805.
Fama, E.F., 1991. Efficient capital markets: II. The journal of finance, 46(5), pp.1575-1617.
Jegadeesh, N. and Titman, S., 1993. Returns to buying winners and selling losers:
Implications for stock market efficiency. The Journal of finance, 48(1), pp.65-91.
Kaczynski, D., Salmona, M. and Smith, T., 2014. Qualitative research in finance. Australian
Journal of Management, 39(1), pp.127-135.
Lakonishok, J., Shleifer, A. and Vishny, R.W., 1994. Contrarian investment, extrapolation,
and risk. The journal of finance, 49(5), pp.1541-1578.
Law, S.H. and Singh, N., 2014. Does too much finance harm economic growth?. Journal of
Banking & Finance, 41, pp.36-44.
Malkiel, B.G., 2003. The efficient market hypothesis and its critics. Journal of economic
perspectives, 17(1), pp.59-82.
McLean, R.D. and Zhao, M., 2014. The business cycle, investor sentiment, and costly
external finance. The Journal of Finance, 69(3), pp.1377-1409.
Piotroski, J. D. 2000. Value investing: The use of historical financial statement information to
separate winners from losers. Journal of Accounting Research, 38, pp.1-52.

10ADVANCED FINANCIAL MANAGEMENT
Porta, R.L., Lakonishok, J., Shleifer, A. and Vishny, R., 1997. Good news for value stocks:
Further evidence on market efficiency. The Journal of Finance, 52(2), pp.859-874.
Sg.finance.yahoo.com (2019). DBS Group holding limited. Retrieved on 10 August 2019
retrieved from https://sg.finance.yahoo.com/quote/D05.SI/history?
period1=1558290600&period2=1565202600&interval=1d&filter=history&frequency=1d
Statman, M., 2014. Behavioral finance: Finance with normal people. Borsa Istanbul
Review, 14(2), pp.65-73.
Zingales, L., 2015. Presidential address: Does finance benefit society?. The Journal of
Finance, 70(4), pp.1327-1363.