GE.SI - S$12.84 / OCBC.SI - S$7.90
• OCBC’s purchase of 490,000 GE shares on Tuesday (when GE traded at $12.86-12.92) may well lead to speculation of a third attempt by OCBC to privatize its insurance subsidiary. (Note that counting on such an outcome after OCBC bought 820,000 shares in Sept’08 would have been off track.)
• OCBC made its first attempt in May 2004 offering OCBC shares for GE. The offer raised OCBC’s stake from 48.7% to 81.1%, making GE its subsidiary.(Note GE was trading at $11.30 when OCBC struck, ie stock is not a lot higher today than 7 years ago; and OCBC then at $4.875 after adjusting for stock split).
• In Jun’06, OCBC offered $16 cash per GE share, raising its stake to 87.10%.
• The question is at what price will OCBC likely try again (just for illustration, at $13, the remaining GE shares not owned would cost $790 mln), taking into account: a. the impact of the resultant goodwill on its capital ratios, which are the highest among the Big 3; b. GE’s embedded value of $7075 mln and NAV of $3828.4 at end 2010 / Sept’11 respectively, vs current market cap of $6077.42 mln.
• Bloomberg records show 4,545,030 GE shares (or only 1% / 7.5% of freefloat) being held by institutional shareholders, such as First State, Vanguard, Putnam, Allianz.
• GE peaked at $22.40 in July’07 (along with global markets before the financial crisis hit), and bottomed at $7.77 in Feb’09. Its stock performance in the last 2 years is not very different from other stocks in the financial sector. But neither has its performance, no thanks to the volatile financial markets.
• GE shares may therefore be worth picking up, especially given the general market weakness. (Note however trading in GE is rather illiquid.)
• We maintain preference for DBS in the sector.
No comments:
Post a Comment