Overseas Chinese Banking Corporation (OCBC Bank)

[piggo]

OCBC Said in Talks for All-Debt Financing for Wing Hang Deal

Singapore-based OCBC plans to sell stock later to help repay the short-term loan, said the people, who asked not to be identified because the discussions are private.

[felixleong]

normally is do a bridge loan first, example a few banks pool $$ together to fund the deal
then 3-6 months later OCBC will repay this short term loan

But how will OCBC raise cash to repay can be in a few ways
1) rights issue
2) placement
3) selling of business units (example sell out stakes in GE or UE)

however general view by analyst is that path 1) rights issue would be the most likely scenario

The recent weakness in OCBC share price from a high of 11.20 last year till now 9.xx level is due to the overhang of a possible rights issue

I strongly think that those who are holding OCBC or have a long term positive view of it should have some cash ready
If a rights issue come, its those that are cash rich and aggressive to apply for excess rights that benefits.

Those that sell out their rights or choose not to take up will be at a great disadvantage

[yeh]

Hi felix.
Seem like you are vested too.
I have noticed the OCBC insiders also sold quite a number of shares since they announce for this wing hang deal.
Now I started to feel uncomfortable for the share px dropping. No idea how much it will drop.
Sighz....

[Temperament]

i think for long term investor should be quite O. K. if there is renounceable Rights Issue.
Even if you have no money to subscribe to the Rights Issue or don't want to subscribe.
You can sell the entitlements as NIL-Paid-Rights.
Then we may buy the NPR and subscribe for the mother shares if feasible.

[felixleong]

Hi felix.
Seem like you are vested too.
I have noticed the OCBC insiders also sold quite a number of shares since they announce for this wing hang deal.
Now I started to feel uncomfortable for the share px dropping. No idea how much it will drop.
Sighz....

If you are a long term investor, then a big drop would be a good opportunity for you to buy more at a cheaper price.

Mr market is here to serve you not to guide you, focus on the fundamentals instead of the stock price. If you think you can buy more with a decent margin of safety, why not?

[yeh]

Hi felix.
Seem like you are vested too.
I have noticed the OCBC insiders also sold quite a number of shares since they announce for this wing hang deal.
Now I started to feel uncomfortable for the share px dropping. No idea how much it will drop.
Sighz....

If you are a long term investor, then a big drop would be a good opportunity for you to buy more at a cheaper price.

Mr market is here to serve you not to guide you, focus on the fundamentals instead of the stock price. If you think you can buy more with a decent margin of safety, why not?

yes, felix.thanks for your view.
think i will subscribe the right, if really right issue.
or buy more when it drop further.

[Art or Science]

Hi guys,

What price would you all pay for ocbc? If I simply use P/B ratio of 1, it means I will only buy when it reaches 8.33..

However, historically, ocbc's P/B ratio was never below 1 (if my research is right)..

Will a similar episode happen to DBS when it took over Dao Heng in 2001?

Just a newbie wanting to learn

[felixleong]

Hi guys,

What price would you all pay for ocbc? If I simply use P/B ratio of 1, it means I will only buy when it reaches 8.33..

However, historically, ocbc's P/B ratio was never below 1 (if my research is right)..

Will a similar episode happen to DBS when it took over Dao Heng in 2001?

Just a newbie wanting to learn

Normally for valuing banks, investors look at PE and PB
Banks normally trade at 1 times book or less only during crisis, which is rare (once in a decade kinda like asia financial crisis or the recent global financial crisis)

For a traditional saving and loan company, you might wanna pay just 1 times book value or less.

However for a bank like OCBC, it generates a lot of income from businesses such as asset management (Bank of Singapore) and Insurance (Great Eastern) that do not use much assets, only half its income comes from traditional lending (borrow $$ from depositers and lend to SMEs or consumers) which is asset heavy.

Historically Banks trades close to the valuation of the STI which is about 15 times earnings (do note that 1/3 of the index consists of our local banks)

With a growth rate of 10% and a yield of 3-4%, 15 earnings could be a fair price for a bank like OCBC, at 12 times would be a small margin of safety and at 10 times earnings or less its a steal for a solid blue chip.

Also with the new Basel III ruling, banks are at least 2 to 3 times safer than they were before 2007 (but it doesn't mean they cant go down under), yet Mr market now is pricing banks at only 10-12 times earnings.

Cheers ^^

[Art or Science]

Hi guys,

What price would you all pay for ocbc? If I simply use P/B ratio of 1, it means I will only buy when it reaches 8.33..

However, historically, ocbc's P/B ratio was never below 1 (if my research is right)..

Will a similar episode happen to DBS when it took over Dao Heng in 2001?

Just a newbie wanting to learn

Normally for valuing banks, investors look at PE and PB
Banks normally trade at 1 times book or less only during crisis, which is rare (once in a decade kinda like asia financial crisis or the recent global financial crisis)

For a traditional saving and loan company, you might wanna pay just 1 times book value or less.

However for a bank like OCBC, it generates a lot of income from businesses such as asset management (Bank of Singapore) and Insurance (Great Eastern) that do not use much assets, only half its income comes from traditional lending (borrow $$ from depositers and lend to SMEs or consumers) which is asset heavy.

Historically Banks trades close to the valuation of the STI which is about 15 times earnings (do note that 1/3 of the index consists of our local banks)

With a growth rate of 10% and a yield of 3-4%, 15 earnings could be a fair price for a bank like OCBC, at 12 times would be a small margin of safety and at 10 times earnings or less its a steal for a solid blue chip.

Also with the new Basel III ruling, banks are at least 2 to 3 times safer than they were before 2007 (but it doesn't mean they cant go down under), yet Mr market now is pricing banks at only 10-12 times earnings.

Cheers ^^

Thanks. Felix.

How would you compare OCBC to DBS? In terms of PB and PE, DBS seems to have lower numbers.

However in terms of growth, OCBC seems to be doing slightly better. CAGR of 7.6% over last 10 years.

[felixleong]

DBS and UOB are also good picks
Most analysts are favoring either UOB or DBS rather than OCBC

however for small time retail investors, 1 lot of UOB or DBS could be rather cash heavy

I personally like DBS a lot too, the new CEO is very numbers driven and DBS has seen 12 consecutive quarters of growth

UOB I do not like, as they previously sold their insurance unit away. The key difference comparing UOB and OCBC is OCBC having a prize jewel Great Eastern.

DBS seems stronger in areas such as M&A, IPOs

OCBC seems stronger in areas such as asset management (private banking business via BOS)

OCBC also has non core assets such as UE which I dislike, would wish for them to dispose of UE

Valuation wise they all seem pretty close in terms of PE ratio