Brokers' Call: OCBC

OCBC

Broker: CIMB
Call: Buy
Target price: $10.01

Asian private banks tend to have a long list of suitors when put up for sale. According to press reports, the three local banks were supposedly all interested.

The purchase price of US$320 million (S$430 million) for Barclays' wealth management business in Singapore and Hong Kong is equivalent to 1.75 per cent of its AUM or assets under management (US$18.2 billion).

The acquisition is viewed as useful for AUM scale but not immediately significant earnings.

Scale is important in this industry and this acquisition will put OCBC's AUM back within range of DBS which is in the top 10 range. OCBC is 11th.

UOB, the late entrant, had in the past two years hired almost a whole team from Julius Baer and boasted an AUM in the US$59 billion range last year.

For OCBC, earnings contributions should at best be in the S$30 million to S$40 million range. This is 1 per cent of financial year 2015 earnings forecast.


SINGTEL

Broker: OCBC Investment Research
Call: Buy
Target price: $3.96

Optus, Singtel's Australian unit, is looking to revamp its consumer and enterprise divisions, and to make an unspecified number of job cuts, which the Sydney Morning Herald reported could be as many as 480 positions.

However, Optus had earlier denied a report in The Australian that it could cut as many as 1,000 jobs under a three-year cost-cutting programme.

According to Optus, these changes, which are crucial for the company's "transformation strategy", will see the creation of a new holistic customer service model, as well as see Optus Business, and the wholesale and satellite divisions rationalise roles and optimise resources in response to the increasingly competitive trading environment.

So far, the company has not disclosed the savings or the cost of the restructuring, but Singtel incurred an exceptional loss of $67 million in the third quarter of the 2013 financial year.


CROESUS RETAIL TRUST

Broker: CIMB
Call: Buy
Target price: 91 Singapore cents

Croesus retail (CRT) expands its footprint into Hiroshima with the acquisition of the Fuji Grand Natalie for 3.3 billion yen (S$40.2 million), 6.3 per cent below property valuation.

Located in Hatsukaichi City, the property is a prominent large-scale suburban shopping mall and located close to MRT stations and access roads.

There are 53 sub-tenants offering supermarket, fashion, food and beverage, fitness and an amusement centre within the mall. This allows it to function as a one-stop shopping, dining and leisure destination.

Post-acquisition, CRT's assets under management will expand 3.7 per cent to 99.8 billion yen with strong diversification.

Post this purchase, CRT has $33 million in cash proceeds.

This will enable the group to continue looking for more purchases to expand its portfolio and earnings base.

A version of this article appeared in the print edition of The Straits Times on April 11, 2016, with the headline 'Brokers'Call'. Print Edition | Subscribe