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OCBC share price ready to explode?

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Despite being consistently ranked as one of the strongest banks in the world, OCBC’ stock is perennially the least expensive among the three local banks. However, like DBS and UOB, OCBC share price enjoyed a dizzy spell for the past two years, storming from $7.90 in February 2016 to reach the giddy high of $14 this year.

The key reason for the bullish run of the local bank stocks should be attributed to the improving economy condition in Singapore. However, recent government property curbs and short-selling activities had pulled the brake on the surging form of OCBC share price. Can OCBC share price regain its mojo and returns to form?

The recent correction in OCBC share price is considered healthy, so investors should not panic. In fact, 2QFY2018 results had been pretty strong. OCBC reported net profit after tax of $1.21 billion for the second quarter, climbing 16% from S$1.04 billion a year ago, and 9% from $1.11 billion in the previous quarter. The robust results provided the narrative for OCBC’s growth momentum.

Due to the volatility of bank stocks, the key to making money from this counter is to have a strategy of setting the right entry and exit price. On this note, I believe three factors could shape OCBC share price in the coming months.

OCBC share price

Divestment of non-core assets

Unlike DBS and UOB, OCBC has several major divestment of non-core assets on the card. The positive catalysts that could set OCBC share price on fire would be of course the divestments of stakes in Great Eastern Malaysia, Hong Kong Life and United Engineers. Collectively, the trio of divestments could yield potentially more than $1 billion for OCBC.

As of 30 June 2018, OCBC had an unrealized valuation surplus of $10.2 billion, an increase from last year’s $8.6 billion. The unrealised valuation surplus largely represents the difference between the carrying amounts and market values of its properties, investments in associates and quoted subsidiaries as at the end of respective periods. Thus, I believe that there are still numerous hidden gems in OCBC that are yet to be divested. The divestments of these non-core assets could potentially unlock value in OCBC share price.

Shares buybacks

Prior to the recent correction, OCBC share price had been on a [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: August 16, 2018 — 4:22 am

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