Post Reply
6841-6860 of 6990
Singapore banks have so far mostly failed to create shareholder value through overseas M& A. None of the Singapore banks' major overseas investments have been able to achieve even close to their 11-12% sustainable ROI targets so far on a standalone basis. The main reasons have been either paying too big a valuation premium and/or simply failing to execute as envisaged. Based on CS' estimates, if OCBC purchases Wing Hang Bank (WHB) at a multiple of 1.9x 2013E P/B, it needs to make a trade-off between ROE dilution and capital comfort. If MAS agrees and OCBC is comfortable, the transaction can be done with minimal ROE dilution with less than 40% new equity funding. But Basel III fully loaded CET1 could fall to 9% levels. While there might be strategic rationale on paper, the hard part will be to justify the valuation premium to be paid. Assuming OCBC pays 1.9x 2013E P/B for Wing Hang, ROEs would have to sustainably improve to 21% levels (CS 2014E ROE 9.2%) to achieve the hurdle rate ROI of 11%. So in effect, OCBC would have to improve WHB's sustainable ROEs to its cyclical peak of 18% levels and add more synergies to justify a 1.9x price tag. CS' HK banks analyst estimates that WHB's normalised ROEs could at best improve to 15% levels (assuming short-term rates go up and OCBC can bring in some improvements). CS maintains UNDERPERFORM on OCBC with $10.20 TP.
OVERSEA-CHINESE Banking Corporation (OCBC Bank) said on Tuesday that it has agreed to subscribe for up to 207.55 million new shares in Bank of Ningbo Company Limited at RMB8.85 each.
The acquisition, which will cost about RMB1.8 billion, or S$383 million, will boost OCBC?s stake in the China bank from 15.34 per cent to 20 per cent - the maximum foreigners can own in a Chinese bank.
The purchase will be funded through internal resources.
Sista Jean,
You can smiling all way hor!!!
Cheers!!!
Grab as mucg at current price!!
Singaporean Banks' Diversification Drive Continues: Fitch Ratings
Singapore-based Oversea-Chinese Banking Corp's (OCBC, AA-/Stable) potential takeover of Hong Kong-based Wing Hang Bank (A-/Stable)) reflects its continuing drive to diversify its business - and especially with regard to greater China, which has long been articulated as one of its targeted markets.
If the proposed acquisition is successful, OCBC's exposure to greater China should rise significantl...y - from 15% of total loans to around 25%. This could potentially weigh negatively on the bank's credit profile, as the credit, operating and regulatory risks are higher in such markets than in its home turf of Singapore.
The WHB acquisition would provide OCBC a more robust platform for expanding into China's large and rapidly growing market. However, the extent to which the ratings could be potentially pressured in the near-term depends in part on the cost of the acquisition and the manner of its financing.
The overseas expansion strategy of Singaporean banks is not a new phenomenon, and has been ongoing for the last decade. The Singaporean banking system is saturated, increasingly leveraged, and characterised by thin margins, so a greater reliance on regional markets for growth have become integral to Singaporean banks' operating strategies.
Regional expansion heightens the risk for the banks' profile, but this has so far been managed in a prudent manner, with a sound risk management record and the maintenance of high core capital. Singapore banks are prepared to walk away from transactions should there be constraints to gaining control, as was evident from the failed DBS/Danamon deal earlier in 2013.
The agency has highlighted in the past that that this trend is likely to apply downward pressure on the ratings of Singaporean banks in the medium term. This arises from the growing influence of high-growth but also higher-risk markets such as China, India and Indonesia on the banks' credit fundamentals, through their regional expansion and these economies' rising interconnectedness - especially with Hong Kong and Singapore.
The proposed takeover is not a binding offer, and would remain subject to regulatory approval. If it goes through, it would be OCBC's largest acquisition since its USD2.8bn purchase of Keppel Capital Holdings Ltd. in 2001.
WHB, with assets of USD26bn, is around 10% of the size of OCBC.
for your reading pleasure ....
Oversea-Chinese Banking Corporation (BUY S$12.45)
We believe talks between OCBC and substantial shareholders of WHB started in Oct 13. However, both sides have not reached a conclusive and binding agreement after three months of negotiation. We believe nothing prevents another bank from initiating a separate bid to acquire WHB after 31 Jan 14. While OCBC is our least preferred pick, the correction in its share price has made valuation more attractive. Maintain BUY. Target price: S$12.45. OCBC announced it had entered into an exclusivity agreement with the substantial shareholders of Wing Hang Bank (WHB) on 31 Dec 13. The substantial shareholders of WHB agreed to engage exclusively with OCBC to finalise the terms for a possible transaction until 31 Jan 14. OCBC will be making a general offer for WHB if a deal is finalised within the stated time frame. There is no binding agreement at this stage and discussions between OCBC and the substantial shareholders of WHB are ongoing. OCBC and WHB have also not secured any approval from MAS and HKMA. In our view, nothing prevents another bank from initiating a separate bid to acquire WHB after 31 Jan 14. WHB has 43 branches in Hong Kong, 14 branches in China (the bulk in Guangdong province) and 11 branches in Macau. It is owned by the Fung family (20.3 per cent), Bank of New York Mellon (20.8 per cent) and Aberdeen Asset Management (8.9 per cent). WHB trades at HK$117.20, or 1.77x P/B, with a market capitalisation of US$4,619.3 million. It reported net profit of HK$1,007.5 million for 1H13, flat yoy, with an annualised ROE of 9.9 per cent. WHB would serve as a springboard for OCBC to further expand in Greater China, an area of focus in its New Horizon III Strategic Plan (2011-15). OCBC could participate in the offshore renminbi business in Hong Kong. However, we see the relatively smaller size of OCBC?s treasury business as a limiting factor, preventing OCBC from fully benefitting from the offshore renminbi business. Assuming a price tag of US$5 billion for WHB, the acquisition works out to HK$126.87/share, or 1.91x P/B based on BVPS of HK$66.39 as at Jun 13. The price tag represents a small premium of 8.3 per cent to the last traded price of HK$117.20. We view pricing at 1.91x P/B as being slightly stretched, given the competitive market in Hong Kong. However, the negative impact is moderated by the smaller size of WHB, which represents 18.7 per cent of OCBC?s current market capitalisation.- UOB KayHian
OCBC ? MER target price $10.40
http://sgx.i3investor.com/blogs/sgxstockwarrant/13716.jsp
OCBC suspended trading on Monday after announcing its plans to bid for Wing Hang Bank. Yesterday, the local bank resumed trading and ended 1.2% lower day on day. Macquarie Equities Research (MER) released a research note on Monday stating their views on the attempted acquisition. MER has a 12-month price target of $10.40 and a ?Neutral? rating on the bank. Some excerpts are shown below.
Event
OCBC Group and Wing Hang Bank have both announced that they have entered into an exclusivity agreement until January 31 to attempt to formalize an acquisition by OCBC of Wing Hang via a general offer.
Impact
Specifically, the exclusivity agreement was entered into on December 31, with the counterparties being OCBC and the major shareholders of Wing Hang -- the Fung family and BNY.
This announcement does not constitute a binding agreement on an acquisition.
There is no mention of pricing in the announcement.
MER?s action and recommendation
It is hard to come to any conclusions in light of the limited disclosures, but MER?s initial thoughts are that it may be difficult to reach an accord on pricing. Wing Hang is a 9-10% return on equities (ROE) business, implying that any significant premium over book value would be difficult to justify on economic grounds even factoring in a control premium. MER?s sense is that OCBC may be constrained by shareholders from offering an irrationally high price although given the history of Singapore banks in Hong Kong, MER admits there is risk in coming to any such conclusions at this point.
Wing Hang's shareholders are likely to be mindful of recent comps and demand at least a valuation as high as Chong Hing's 2.3x price to book value (P/BV) -- and very likely even higher given Wing Hang's larger overall banking footprint.
Bloomberg, citing un-named sources, has reported that a Chinese insurer valued the company at a maximum 1.7x P/BV. However, MER reckons that the family is likely to hold out for 2.3x P/BV at a minimum, and more likely a price valuation that is north of 2.5x P/BV.
Such a high valuation would be significantly value destructive for OCBC's shareholders, in MER?s view, and MER would be cautious on the stock pending further clarity.
...last: $9.79...
Article title=>
Link=> http://sg.finance.yahoo.com/news/ocbc-explains-market-rationale-wing-011500324.html
Key highlight=> OCBC confirmed what what I said earlier, the acquisition is to tap into China economy.
" Greater China is one of our four core markets together with Singapore, Malaysia and Indonesia. We have been building capabilities and investing in these core markets for several years, and will continue to do so, taking a long term view towards growth opportunities in these regions. Greater China presents excellent prospects for OCBC as China increasingly becomes the driver of economic growth in the region, and its interconnectivity with the rest of Asia and the world in trade, wealth and capital flows have created significant business activities in the Greater China region. Its currency, the Yuan, is fast becoming an increasingly prominent currency for international trade settlement and financing."
To me this is a good news for OCBC in mid to long term (5-10 years). No longer vested in OCBC.
OCBC explains market rationale for Wing Hang Bank acquisition
Link=> http://sg.finance.yahoo.com/news/ocbc-explains-market-rationale-wing-011500324.html
Key highlight=> OCBC confirmed what what I said earlier, the acquisition is to tap into China economy.
" Greater China is one of our four core markets together with Singapore, Malaysia and Indonesia. We have been building capabilities and investing in these core markets for several years, and will continue to do so, taking a long term view towards growth opportunities in these regions. Greater China presents excellent prospects for OCBC as China increasingly becomes the driver of economic growth in the region, and its interconnectivity with the rest of Asia and the world in trade, wealth and capital flows have created significant business activities in the Greater China region. Its currency, the Yuan, is fast becoming an increasingly prominent currency for international trade settlement and financing."
To me this is a good news for OCBC in mid to long term (5-10 years). No longer vested in OCBC.
Rosesyrup ( Date: 07-Jan-2014 21:08) Posted:
|
Due to HK's unique position as a financial hub for bigger Mainland, the acquisition will allow OCBC to tap into China growing economy, which would improve OCBC growth rate and competitive position.
Nevertheless, I am neutral on Banking sector for 2014.
I have posted the reasons at my thread=> Jarabe De Rosa
http://www.sharejunction.com/sharejunction/listMessage.htm?topicId=12080& msgbdName=User%20Research/Opinions& topicTitle=JARABE%20DE%20ROSA
If the acquisition is successful, perhaps OCBC's position might drop in the World's Strongest Banks & World's Safest Banks ranking?
Market isn't rosy with what the management is doing.
Wrong timing for this sort of actions....it was on the table but execution isn't perfect...
Oversea-Chinese Banking Corporation Limited wishes to announce that on 31 December 2013, OCBC entered into an exclusivity agreement with the substantial shareholders of Wing Hang Bank, Limited, being members of the Fung family and their affiliates and related family trusts, and BNY International Financing Corporation. Under the terms of the Exclusivity Agreement, the Substantial Shareholders have agreed that, until 31 January 2014, they will engage exclusively with OCBC to seek to finalise the terms for a possible transaction which would, should it proceed, involve OCBC making a general offer for all of the shares of WHB...
By Aaron Back
In getting a bigger piece of China, OCBC Bank's possible $5 billion bid for Wing Hang Bank might also come with something investors won't like: falling Hong Kong property prices.
Mid-sized Hong Kong lender Wing Hang has been on the block since September when senior managers said they had a number of interested suitors. On Monday, Singapore-based OCBC said it is now in exclusive talks with Wing Hang. The price, which The Wall Street Journal said is still being negotiated, would represent a nearly 50% premium to where Wing Hang traded before merger talks became public last year.
In November, OCBC Chief Executive Samuel Tsien told analysts potential acquisitions would fit certain " mega trends," including growing trade between China and Southeast Asia, and the rise of offshore yuan trading. Wing Hang's 16 mainland branches and sizable cross-border corporate lending business seems to fit the bill. It doubles the size of its mainland branch network and would increase OCBC's China exposure to around 25% of its loan book from 15% currently, according to estimates by UBS.
But with Wing Hang's China business comes Wing Hang's Hong Kong real estate, including its offices and investment properties. While some Hong Kong banks value such properties at cost on their books, Wing Hang does so at current market value. This means its balance sheet has benefited from the frothy market, but is vulnerable to a downturn. Barclays expects commercial property prices to fall by 20% over the next two years, and estimates that a 10% fall in 2014 could dent Wing Hang's profits by 3.7% and its book value by 2.7%.
The risk of a substantial correction is real. Hong Kong's interest rates are tied to the U.S. via a currency peg and the recent rise in rates has taken the punch out of prices. More taper equals more pain in Hong Kong. Meantime, China's economy, a major source for Hong Kong property demand, is slowing again.
Any problems in Wing Hang's property loan book should be manageable, due to the stringent loan-to-value regulations imposed on mortgages by Hong Kong regulators and its low loan-to-deposit ratio. But a faltering property market is likely to crimp profits as loan origination dries up.
OCBC's offer pegs Wing Hang at around 1.9 times end-June book value. That is in line with current valuations of other Hong Kong banks, according to Barclays. But it assumes too much about the health of Hong Kong's property market. OCBC investors would be better skipping this China play.
In getting a bigger piece of China, OCBC Bank's possible $5 billion bid for Wing Hang Bank might also come with something investors won't like: falling Hong Kong property prices.
Mid-sized Hong Kong lender Wing Hang has been on the block since September when senior managers said they had a number of interested suitors. On Monday, Singapore-based OCBC said it is now in exclusive talks with Wing Hang. The price, which The Wall Street Journal said is still being negotiated, would represent a nearly 50% premium to where Wing Hang traded before merger talks became public last year.
In November, OCBC Chief Executive Samuel Tsien told analysts potential acquisitions would fit certain " mega trends," including growing trade between China and Southeast Asia, and the rise of offshore yuan trading. Wing Hang's 16 mainland branches and sizable cross-border corporate lending business seems to fit the bill. It doubles the size of its mainland branch network and would increase OCBC's China exposure to around 25% of its loan book from 15% currently, according to estimates by UBS.
But with Wing Hang's China business comes Wing Hang's Hong Kong real estate, including its offices and investment properties. While some Hong Kong banks value such properties at cost on their books, Wing Hang does so at current market value. This means its balance sheet has benefited from the frothy market, but is vulnerable to a downturn. Barclays expects commercial property prices to fall by 20% over the next two years, and estimates that a 10% fall in 2014 could dent Wing Hang's profits by 3.7% and its book value by 2.7%.
The risk of a substantial correction is real. Hong Kong's interest rates are tied to the U.S. via a currency peg and the recent rise in rates has taken the punch out of prices. More taper equals more pain in Hong Kong. Meantime, China's economy, a major source for Hong Kong property demand, is slowing again.
Any problems in Wing Hang's property loan book should be manageable, due to the stringent loan-to-value regulations imposed on mortgages by Hong Kong regulators and its low loan-to-deposit ratio. But a faltering property market is likely to crimp profits as loan origination dries up.
OCBC's offer pegs Wing Hang at around 1.9 times end-June book value. That is in line with current valuations of other Hong Kong banks, according to Barclays. But it assumes too much about the health of Hong Kong's property market. OCBC investors would be better skipping this China play.
*FLASH NOTE* OCBC - Made Binding Bid For Wing Hang (Hold, TP SGD11.30, OCBC SP)
According to Bloomberg, OCBC has submitted a binding bid for Hong Kong?s family-run Wing Hang Bank (WHB). The bid is believed to have priced WHB at less than 2x P/BV, which is lower than the asking price. The relevant parties are currently in talks to bridge the valuation gap. WHB has 43 branches in Hong Kong, 12 in Macau and 14 in China. Operations outside Hong Kong contribute about 32% of its loan book. If the bid is successful, WHB would double OCBC China?s loan book. During its 3Q13 analyst briefing in Nov 2013, OCBC management said exposure to Hong Kong?s consumer space is not a necessity as it already has a corporate presence in the territory and private wealth management business through Bank of Singapore. Its ultimate focus is to broaden its presence in China.
In our view, OCBC?s bid for WHB may deter investor interest in the stock for now, given the risk of overpaying. But a successful bid at a reasonable price may not immediately remove stock overhang as concerns over execution capabilities will linger. We value OCBC at SGD11.30, based on 14x 2014E core EPS, consistent with its rolling P/E average since 2005. At our TP, the implied FY14E P/BV is 1.5x, equivalent to its rolling P/BV average since 2005.
Click HERE to download PDF report
NG Wee Siang
[email protected]
(65) 6432 1467
__________________
More dumping?
OCBC shares fall 1.5% on Wing Hang bid news
Singapore's OCBC in exclusive talks to buy Wing Hang Bank
Singapore's Oversea-Chinese Banking Corp (OCBC) has begun exclusive talks to buy Hong Kong's Wing Hang Bank in a deal that would value the family-run lender at about US$5.3 billion, two people familiar with the matter told Reuters on Friday.
OCBC has offered to buy Wing Hang at about twice its book value and final terms of the deal are still being negotiated, the sources added.
It remains unclear when the two parties are likely to clinch a deal. Binding bids were due in mid-December.
OCBC declined to comment, while Wing Hang could not be reached immediately.
OCBC Bank confirmed the reversal after hitting the resistance.
http://mystocksinvesting.com/singapore-stocks/ocbc-bank/ocbc-bank-get-ready-for-the-reversal/
marubozu1688 ( Date: 28-Dec-2013 21:11) Posted:
|
would likely move up to $10.30.
http://sporeshare.blogspot.sg/2013/12/ocbc.html
New123 ( Date: 28-Dec-2013 09:52) Posted:
|
Haha! Golden Horse Award. Go with the flow. Hope for the best
chinastar ( Date: 30-Dec-2013 01:32) Posted:
|
no regret, the golden horse is coming.
nea03177 ( Date: 28-Dec-2013 21:18) Posted:
|