DBS (Development Bank of Singapore)

[weijian]

I suppose the idea is to enlarge the base, in this case by 10%, so that subsequent effort will be accelerated by 10%.  Doing a one-off large special dividend will do but I suspect the result of a one-off bump in the share price may not be quite as desirable for DBS?

An alternate to enlarge base so that subsequent effort will be accelerated by 10%, the BOD could  bump up the dividend by 10% to achieve the same effect. I believe DBS is 1 of those that does a quarterly "fixed" dividend.

Of course, both moves -  either enlarge base OR bump up fixed dividend - achieve similar capital returns to shareholders. The only difference I see is the different accounting on the share capital/reserves as I mentioned earlier. That is why is puzzling me.

I reckon I am probably overthinking on this! Regardless on the matter of capital returns, DBS is making the right moves to return them.

To recap, just 10months ago, DBS announced a 10:1 bonus issue - which had the effect of increasing its share base by 10% and diluting pro-forma EPS by 10% as well. Everyone loves having more pieces of pizza even though each piece is smaller and so, it probably had the effect of bumping up its share price.

Barely 7 months after the 10:1 bonus, DBS kick started its 3billion SBB program and has spent ~130mil in the last 2weeks. Arguably, the SBB is buying more expensive bonus shares now - bumping up their pro-forma EPS, which had just earlier been diluted. Because they are (probably) buying more expensive shares, they end up buying less and so would have a lower EPS improvement than it could have been.

From the capital allocation perspective of a long term shareholder of DBS (eg. Temasek), it definitely isn't the optimized path. The only optimization is for exiting shareholders who have more shares to sell for a higher price (due to the bonus issue) to a confirmed buyer (SBB program). Not trying to point fingers here.

Nonetheless, DBS OPMIs probably don't care much because their TSR has indeed been world class this year.