OCBC share price mumbo jumbo with “Golden Triangle”!
LIFETIME MEMBERSHIP It’s official! On 28 July, Monetary Authority of Singapore (MAS) lifted the dividend cap on Singapore banks. The lifting of dividend cap set OCBC share price on fire. From 28 July, OCBC share price surged from $12.07 to a high of $12.46 on 10 August. On the basis of the current run, can OCBC share price hit $15 by end of the year? While OCBC share price has taken some knocks following ex-dividend on 13 August, the catalysts could drive OCBC share price to new heights in the coming months.
OCBC share price nearly hit $14 in 2018. That was the year in which the bank recorded full-year net profit of $4.5 billion. Fast forward to FY2021, the first half net profit had already hit a high of $2.75 billion, surpassing the $2.3 billion profit in 2018. Assuming OCBC recorded $5.2 billion earning for full-year, the annualized EPS could be $1.15. Applying multiple of 13, my target OCBC share price is about $15.
Apart from the lifting of dividend cap by MAS, another tailwind that will aid OCBC share price is the shares buybacks by the bank. Traditionally, OCBC is considered the most aggressive when it comes to share buybacks in recent years. In fact, the series of share buybacks in March and April 2020 enabled OCBC share price to make a swift recovery from the low of $7.80. As of 17 June, a total of 9.08 million of shares had been purchased from the market. For perspective, both DBS Group and UOB have not conducted any shares buybacks in 2021.
Incidentally, the share buybacks also occurred at a time when Helen Wong took over as the Group CEO. With a recovering OCBC share price, it seems that the new CEO started her tenure at a positive note. But of more interest to investors should be the bank financial performances, which could shape OCBC share price performances for the rest of FY2021.
Although the share buybacks will provide nice support for OCBC share price, they are unsustainable if the bank is unable to deliver good financial results. In the 1HFY2021 results, net profit dropped 23% on quarter-to-quarter basis due to exceptionally strong performance in first quarter. In this article, I will share my insights on the outlook for OCBC share price in FY2021.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am vested in this counter (holding 6000 shares at an average OCBC share price of $12.38), so my views on OCBC share price may be biased.
OCBC share price pivots in “Golden Triangle”
While most of the limelight is focused on the overall Group’s performance, a deeper dive into the operating results revealed that the bullish OCBC share price is attributed largely to the turnaround of the insurance business (Great Eastern Holdings). The insurance business remains the prized asset for OCBC as it is the only local bank that owns an insurance company. Apart from Great Eastern, two other strategic assets hold the key to the prospects of OCBC share price.
1HFY2021 financial result showed that [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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