DBS Group Research has initiated coverage on Credit Bureau Asia : TCU 0% (CBA) with a “hold” call, noting limited upside to the company’s share price despite its defensive business model and strong dividend yields.

Based on a two-stage dividend growth model, the target price of S$1.02 implies a forecasted growth in dividend per share from 3.6 Singapore cents in FY2023, to 4.7 Singapore cents in FY2026.

This is followed by a “sustainable dividend growth rate” of 2 per cent from FY2026 onwards, said DBS analysts in a report on Tuesday (Apr 18).

Highlighting CBA as a “leading player” in Asean’s credit risk and information solutions industry, DBS is forecasting CBA’s earnings to rise steadily at a compound annual growth rate of 10 per cent by FY2025.

“We like the group’s defensive business model, as we see resilient demand for CBA’s products across different economic cycles (even during the Covid-19 pandemic),” the analysts said.

They also project a dividend yield of 3.7 per cent for FY2023, which is one standard deviation higher than historical dividend yields.

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CBA’s strategic expansion plans, or earnings and dividend surprises may catalyse an upward rerating of the stock, they added.

However, the analysts acknowledge potential headwinds from rising government yields, as they observe an inverse relationship between CBA’s share price and the Monetary Authority of Singapore’s 10-year bond yields.

This means a rising yield environment may see investors channelling capital into other assets instead.

Shares of CBA were trading 0.5 per cent or S$0.005 higher at S$0.98, as at 10.49 am on Tuesday.