OCBC Goes To Hong Kong, Everybody Wing Hang Tonight
302 HK – had my eye on it at HKD 78 thinking it was a good takeover target but missed out because I thought I would have had more time. Last done HKD 117.10.
Lesson learnt : Time is of the essence.
The OCBC news did little to rally the stock much more today and the high of HKD 124.70 on 17 Sep remains intact.
The last time Singapore went to Hong Kong to buy Dao Heng, it was 12 years ago and it left a definite bad taste in the people’s mouths (because Singaporeans like to fancy that DBS belongs to them), coinciding with the dot com bubble bursting, punishing the DBS share price all the way from 18 bucks to 11 in that year.
And to rub salt into the wound, rumour was that Mr Quek invested a good part of his 600 million dollar spoils into AUD at the low and made another killing for himself.
By comparison, OCBC, appearing more astute, is only paying about 1.7 times book for Wing Hang against DBS’s 3-3.2 times book value purchase of Dao Heng. Having said that, Wing Hang’s book value at HKD 64.65 is 80% higher than its 2008 value of HKD 35.88.
But some resemblances are uncanny. DBS paid about HKD 44 billion for Dao Heng and Wing Hang has a market cap of HKD 36 billion.
I am not here to give a deal analysis because we have quite a few out in past 6 hours and more to come.
Citi (OCBC Price Target S$10 Wing Hang Price Target HK94), Edge Singapore, South China Morning Post so far…
OCBC bonds barely dented on the news, granted that it is a small deal even if it means they will have to raise capital for the purchase which should not pose too much of a problem for them.
The exchange traded SGD OCBC 5.1% perpetual (callable 2018) going at 107.71/107.82, 4.16/3.97%.
SGD OCBC 5.6% 03/2019 sub debt (callable 03/2014) going at 101.41/101.95, 2.1/0.8%.
And the latest SGD OCBC 4% perpetual (callable 01/2018) going at 99.12/100.06, 4.05/3.98%.
My main gripes :
* historic highs in S&P (reminiscent of the tech bubble in 2001)
* Li Ka Shing exiting Hong Kong, though not quite
https://tradehaven.net/market/cashing-up-with-li-ka-shing/
* Hong Kong losing out as the main Chinese banking centre as China signs up London and Singapore so far
And also, did I mention I am superstitious ?
After the price paid and experience in integrating Dao Heng Bank into DBS, it’s hard to believe any Singapore bank will want to entertain the challenge of acquiring another HK bank. And much less overpay.
Size is no longer as important or critical. And the “targets” like Wing Hang bank are not inefficient. So the gains to be extracted are much less obvious.
So Wing Hang at current levels is a “take your profits” and enjoy the gains.
It’s Year of the Snake !
12 years ago, DBS bought Dao Heng. 12 years later, OCBC buys Wing Hang ?
Stranger things have happened, and if indeed the suitor is a Singapore bank, just sell the suitor.
They have so much cash, it won’t make a dent in their books.
Fitch Affirms DBS, OCBC & UOB at ‘AA-‘; Outlook Stable 23 Oct.
But like I said, I am superstitious and it is starting to look wrong.