Friday, August 17, 2012
OCBC: Macquarie admits to having hoped for potential further upside from the divestment given deal was contingent on the divestment stocks remaining listed at the time of sale. That hope proved to be in vain as the shares were crossed on Tuesday. Total immediate gains for OCBC should be $1,153m including its share of Great Eastern’s $418m. House does not expect a big div payout from OCBC following the divestment. OCBC’s statement to the SGX says The proceeds arising from the divestment are intended to be applied for re-investment into OCBC Bank’s core financial assets and/or other purposes as the Directors may consider appropriate. House thus maintains a normal 3.5% div forecast for 2012. Macquarie estimates a total 136bp increase in OCBC’s Tier 1 capital ratio to 16.1%. Believe that the group is most likely to utilise the excess funds in inorganic expansion. Possible acquisitions include life insurance assets in Hong Kong and Indonesia, finance companies in Indonesia, or even further Asia-based asset management businesses. No change to underlying profit forecasts, but raise 2012E reported net profit by $1.3b to reflect the $1.15b divestment gains announced 18 July plus another $135m to reflect OCBC’s share of MER’s estimated year-end gains at Great Eastern which are not reflected in the 18 July announcement. Overall, maintain Neutral with $9.40 TP.