OCBC Bank to rock the market with multi-billion dollar hidden assets?

Following the news of OCBC Bank looking to sell its stake in United Engineers Limited last year, the share price of the famous local bank has been on a mighty hot streak. On current bullish form, breaching the $10 per share support level seems inevitable. Will OCBC Bank rock the market with more divestment news?

In my previous article, several readers expressed cynical at my valuation of OCBC shares. Based on the valuation of its equity stake in United Engineers, there is no way OCBC Bank shares would hit the $10 mark. On this, I did not dispute. But market sentiments always play a part in a stock performance. As Warren Buffett often said, price is what you pay but value is what you get. There is often a gap in the intrinsic value of a stock vis-à-vis its market price.

Previously, I have written a few analysis on OCBC Bank shares that I feel are must-read for investors of OCBC. Readers may want to check out and read the following blog posts:

  1. Will Ezra sink OCBC share price?
  2. OCBC considering the sale of United Engineers Ltd
  3. OCBC multi-billion worth of hidden assets

Singapore banks

For OCBC Bank, its hidden assets consist mainly of properties and securities worth $6.45 billion in terms of unrealized valuation surplus. This amount is largely unchanged from $6.42 billion from last year.

Investors must note that when we talk about “unrealized valuation surplus”, it is not the same as the prevailing market value of the assets. According to OCBC Bank’s financial report, the unrealized valuation surplus “represents the difference between the carrying values of its properties and investments in quoted subsidiaries and an associate, and the market values of those properties and quoted investments at the respective periods”.

What the above means is that OCBC Bank may potentially possess hundreds of billions worth of hidden assets waiting to be divested. Normally the market value of the properties and equity securities are not published in financial reports because of commercial sensitivities. To this end, the actual market value of the hidden assets of OCBC Bank are [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: March 13, 2019 — 2:29 am

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