Company Name: UNITED OVERSEAS BANK LTD
| Research House: MacQuarie | Price Call: BUY | Target Price: 20.79 |
Stock Name: OCBC Bk
Company Name: OVERSEA-CHINESE BANKING CORP
| Research House: MacQuarie | Price Call: HOLD | Target Price: 9.41 |
Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD
| Research House: MacQuarie | Price Call: HOLD | Target Price: 14.56 |
Further upside for Singapore banks will be limited as growth momentum eases in 2H12 and beyond, Macquarie says. “The stocks are no longer as compelling value ideas as they were earlier this year, but their solid balance sheets and cash yields should sustain valuations.” It keeps the sector at Neutral.
It expects the sector’s 3Q12 operating earnings to rise 18% on-year, mainly on a low 3Q11 base for OCBC and UOB, with earnings to decline 2% on-quarter, amid tightening margins and slowing loan growth. It notes downside risk from credit costs as the city-state enters a “technical recession,” while slowing GDP growth could pressure the SGD, reducing the cash-yield’s attractiveness.
“But overall, we think that the sector is still defensive and on base case assumptions any valuation downside should be limited.” It keeps UOB as its top pick as it has been the most conservative on organic growth and is the least likely to engage in value-destructive M&A; it rates UOB Outperform with $20.79 target. It sets OCBC’s target at $9.41 and DBS’ at $14.56, rating both Neutral.
OCBC is down 1.1% at $9.37, UOB is down 1.7% at $19.19, while DBS is down 1% to $14.06.
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