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05-04-2012, 01:08 AM
(04-04-2012, 05:56 PM)bran Wrote: to coattails, thanks for the analysis and the details. I'm not disputing the rationale as they have to eventually play catch up to OCBC and UOB in terms of geographical exposure to the higher growth SEA region. But i think that this benefits temasek more than the minorities....(pls correct my numbers if there are any errors)
A: Net profit (pre purchase): 3035mn
B: No. of shares (pre purchase, fully diluted): 2429mn (from annual report)
EPS (pre-purchase)= A/B = $1.25
C: Combined proforma net profit (according to DBS's presentation): 3360mn
No. of shares issued to temasek/fullerton/whatever: 439mn
D: Total new no. of shares = 2868mn
E: EPS (post-purchase) = C/D = $1.17
EPS went down post-purchase
Another way to consider.
F: Temasek's share of DBS pre-purchase = 29% (approximately)
G: Temasek's share of DBS post-purchase = 40.4% (Straits times reported)
H: Temasek's share of profits pre-purchase= F * A = $880.15mn
minorities share of profits pre-purchase= A -H = 2154mn
I: Temasek's share of profits post-purchase= G * C = $1357.44
minorities share of profits post-purchase= C - I = 2002mn
Our share of profits just went down post purchase. Any benefits will have to come from the "Synergies" of the purchase which DBS has guided that it will only come post 2015
But in any case, temasek benefits proportionately more. Couldn't DBS have made a cash consideration and issued rights, giving us all the opportunity to share in proportionately in the new enlarged entity?
Hi bran, you are absolutely right that:
A) Temasek benefit more than us little minority shareholders.
B) Cash deal would have probably been a better option for acquirer shareholder in this instance.
C) If DBS had issued rights to ALL shareholders, we would not have been diluted as we can maintain proportionate ownership.
I guess the issue is that this large stake belongs to Temasek (remember 67%), and it is also pre-approved for foreign ownership by Indonesian regulators (since Temasek is Singapore, right?). If DBS goes looking to buy a another Indon bank on its own, it will face even more regulatory uncertainty and opposition than it is experiencing now. So Temasek has a lot of bargaining power here, and they want to have their cake and eat it as well.
I have my doubts too. But ultimately, I feel that the deal will allow the consolidated DBS to grow its EPS at a fast rate going forward from more geographically diversified sources, thus justifying the deal. I remember reading that DBS is focusing a lot on the Global Transaction Services aka GTS (cash management and trade finance) recently and grew revenue in this area by a lot in 2011. Indonesian companies export a lot of commodities (like coal) to China, so perhaps there are opportunities for DBS there, among others.
DBS management indicated that the revised EPS after the dilution would fall to about $1.20 down from $1.30 (got this from a news article), so that's 8% dilution? Does not look insurmountable to me in the longer term.
(04-04-2012, 07:43 PM)shanrui_91 Wrote: Damanon while being the 6th biggest bank in Indonesia only holds a market share of 4%. This is not surprising given that Mandiri, the largest, has a market share of 13.8%. Will it be able to be in the top 4? Well, only if it can be bigger than the 4 state-owned bank. The current 5th place is CIMB Niaga, another giant to fight with.
banking in indonesia is very fragmented as the entry requirement is very low. and here's a piece of news to ponder about
http://in.reuters.com/article/2012/04/03...7K20120403
Hi shanrui_91, all our neighbours hate us, don't they? Small wonder why Singapore imports so much weapons...
According to an news article I read, the consolidated bank (DBS already has some operations in Indonesia) will become the fifth largest bank. Maybe they will push CIMB Niaga down to 6th? A good old battle between Singapore and Malaysia, much like how our football team is back in the Malaysia Cup!
The entry requirement to banking may be low, but reputation and familiarity plays a part in getting depositors, corporates and counterparties to do business with you. This is especially so when we are talking about an emerging country. DBS actually helps to improve Danamon in this aspect, while capitalizing on existing branches and customers. I do not think it is that easy for any small Indonesian bank to grow to the same scale (albeit only 4% market share) as Danamon, and even if foreign banks come knocking, they would probably do what DBS and CIMB did and look to buy the bigger banks. All the more reason to do so before the Citis, HSBCs, Stand Charts, etc.
