Overseas Chinese Banking Corporation (OCBC Bank)

[freedom]

If you are paying $100 for something worth only $50, no matter what you are buying, be it subprime mortgage or gold or diamond, you are going to make a loss.

Crisis did not happen because banks were lending. Crisis happened because banks were not lending wisely.Actually, it is not the banks that were not lending wisely. It is the investors that mispriced the assets(the MBS or CDOs). Most banks just provided a service demanded by unintelligent MBS/CDO investors.

Thank you freedom for your explanation, and based on that , one could say the nature of the misppricing of assets might also be very much possible for our banks ( although unlikely)

Whether a Micky mouse condo is worth half a million to a million or a suburban condo worth more than 1 million, I am not sure. Misprice is a tricky term. We can only know exactly how much misprice there was after the crisis. Before that, we can build all kinds of models to predicate. But history has proved that "The Market Can Stay Irrational Longer Than You Can Stay Solvent". So if the property market plunges and stays low for long enough, the banks or the homeowners have to take impairment.

We can use the same principles to explain the property market bust during Asian Financial Crisis. Everybody was thinking that the property market would be okay and the banks would be too. As the situation developed and the crisis deepened, the banks were damaged greatly. If the property market did not drop that much or the government came in and propped up the property price, maybe the banks may still take a hit, but not as bad as it was.

Similar things happened during the subprime crisis. Subprime happened much earlier than the financial crisis, in 2006 - 2007. As the crisis developed, the banks were greatly affected, thus, into a financial crisis. But if the subprime crisis did not damage the banks as much as it did, we might still go through a crisis, but not as bad as what we experienced in 2008 - 2009.

If, I mean if, the coming crisis developed in Malaysia, Indonesia and China, OCBC might be greatly affected as it has substantial oversea presence.

[felixleong]

OCBC rallied over 2% today
Guess it was really oversold this year due to the wing hang acquisition worries,
investors finally became more logic and started picking it up at 11.5 times earnings
I think its decently priced but not cheap, if one is looking at 10-15% compounded returns~ at 11.5 times earnings, should be very possible

[Layman A]

Quote:Which value investor doesn't know how to spot a value stock? This has to be my favourite line:

i have similar idea too. No one can be smarter than the Market.
If anyone can spot a value stock, but for how long?
The market usually knows it way ahead of you.
By the time you find it, it has not much IV left.
Maybe WB and people like him know it first before all of us (aka a bit too late already). NO?

market can know things ahead of us but may not respond accordingly and also may not be able to respond if the stock is small-cap and funds cannot come in.

So as value investor, we can "strike" when the news is bad but the underlying fundamentals is still strong and undervalued

From my Layman understanding, my OCBC will definitely have more value at $9.24 today, as compared to $10.50 two months ago, or $11.00 at may13. Right ?

[chialc88]

definitely... a few people is thinking of buying below $9 or better still at $8.88...

Love Compassion


A Life not Reflected is a Life not Worth Living.

[specuvestor]

Timing the market refers to trying to catch the lowest point of the dip/ when the crisis is in its full blown stage or selling out at the highest . I totally agree that the bread and butter of value investors is to buy a dollar at a faction of the cost ( buy low sell high) but how can anyone predict when is the lowest or the highest when the world greatest investor warren buffet could not. Hope this clarifies

I don't think your definition is correct. Market timing is more on the trend and the direction of price movement rather that picking the top/bottom.

Which value investor doesn't know how to spot a value stock? This has to be my favourite line:

Besides fundamentals, there has to be catalysts for rerating on either the asset layer, business layer or the structure layer.

Good to know someone catch my drift

Indeed market timing is not about catching top or bottom... it's an impossible task. But not timing it is even more ridiculous becuase value investing tells you what it is worth now, never when it will be worth. That's why value traps are a consistent reminder.

Fact is even if we say we don't time the market, the management of businesses have to do timing all the time, from hedging, to capex spending to staff and marketing costs. In other words we buy into companies inherently believing that management good track record, including timing, can be extrapolated.

From my Layman understanding, my OCBC will definitely have more value at $9.24 today, as compared to $10.50 two months ago, or $11.00 at may13. Right ?

Cheaper yes... value depends. If u have no access to price charts, how much would you pay to be a shareholder of OCBC?

[AlphaQuant]

From my Layman understanding, my OCBC will definitely have more value at $9.24 today, as compared to $10.50 two months ago, or $11.00 at may13. Right ?

not really - 1 yr ago one will not have guess OCBC paying 1.9x book for Wing Hang

raising capital thru OCBC equity @ 1.3x book to pay for 1.9x book of WingHang (which is 1/7 of OCBC's size) is highly dilutive.

[kbl]

Good morning everyone.

**OCBC Group’s Fourth Quarter Earnings Up 8% to S$715 million,
Bringing Full Year 2013 Net Profit After Tax to S$2.77 billion
Fourth quarter results driven by 22% increase in earnings from banking operations**

http://infopub.sgx.com/FileOpen/OCBC_FY1...eID=274610

**A final tax exempt dividend of 17 cents per share has been recommended for the financial year 2013.**
**Scrip Dividend Scheme
The issue price for the new shares, to be allotted to shareholders who have
elected to receive scrip for the final dividend, will be set at a 10% discount to the average of the daily
volume-weighted average prices of the shares for each of the market days during the price
determination period between 28 April 2014 (ex-dividend date) to 30 April 2014 (the books closure
date), both dates inclusive.**

<vested oldpot>

[toiletsiao]

Good morning everyone.

**OCBC Group’s Fourth Quarter Earnings Up 8% to S$715 million,
Bringing Full Year 2013 Net Profit After Tax to S$2.77 billion
Fourth quarter results driven by 22% increase in earnings from banking operations**

http://infopub.sgx.com/FileOpen/OCBC_FY1...eID=274610

**A final tax exempt dividend of 17 cents per share has been recommended for the financial year 2013.**
**Scrip Dividend Scheme
The issue price for the new shares, to be allotted to shareholders who have
elected to receive scrip for the final dividend, will be set at a 10% discount to the average of the daily
volume-weighted average prices of the shares for each of the market days during the price
determination period between 28 April 2014 (ex-dividend date) to 30 April 2014 (the books closure
date), both dates inclusive.**

<vested oldpot>

the scrip dividend discount is attractive

[felixleong]

10% discount is very attractive, definitely wanna take scrip unless by april end the stock price rallies a lot.

In regards to the Wing Hang acquisition, I've got a feeling that they might do placement to institutional investors instead of a rights issue. The Lee family owns close to 30% of OCBC, I really can't imagine them putting more $$ into this company. They seem more like the kind to sit on their investment and slowly collect the returns.

[Layman A]

In regards to the Wing Hang acquisition, I've got a feeling that they might do placement to institutional investors instead of a rights issue. The Lee family owns close to 30% of OCBC, I really can't imagine them putting more $$ into this company. They seem more like the kind to sit on their investment and slowly collect the returns.

Well, I am definitely against placement to 3rd party investor, for 2 reasons :

1. Placement usually is done with a substantial discount to market price. So why give the discount or rather benefits to an outsider rather than the faithful shareholders.

2. If they decide to go for right issue, it would not be very heavy handed type one, may be 1 right for for every 5 shares ? ( Say at $8 ? )

Assume you have 1 lot of OCBC at hand, to subscribe for 200 shares at say $8 will require you to cough out another $1600 which I believe would not be very difficult for ordinary retail investor.

If you do not like to take up the right ?
Just sell the rights at the open market for a profit lor !
Some one else would be happy to pick it up.