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Latest Forum Topics / OCBC Bank    Last:17.39    +0.06  Post Reply
Great Eastern 20.5
MrBear12
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29-May-2024 15:42     
 
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 Alert Admin 		Almost 100%

Newcomer19707016      ( Date: 29-May-2024 14:40) Posted:

Will ocbc able to successfully delisted Great Eastern this round? How high is the chance?
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Newcomer19707016
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29-May-2024 14:40     
 
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 Alert Admin 		Will ocbc able to successfully delisted Great Eastern this round? How high is the chance?
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FairShake
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28-May-2024 14:14     
 
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 Alert Admin 		Guess I was dead wrong on the " Le Miserables" Wongs and Lees getting on.  Still as feisty as 20 years ago when he and the Lees snuffed out both OCBC attempts to privatise GEH. Respect Sir.

Wong Hong Sun, whose grandfather  was chairman  of Great Eastern for close to twenty years, holds more than 3 million shares. &ldquo Even if I am not sentimental, I won&rsquo t sell,&rdquo he said. &ldquo Half price* is no way.&rdquo

https://www.bloomberg.com/news/articles/2024-05-26/singapore-insurer-s-holders-seeking-better-offer-from-ocbc

It' s game on, with OCBC Opening Offer of $25.60 against Mr Wong&rsquo s &ldquo unofficial fair value&rdquo of $51.20.
*OCBC&rsquo s two previous failed offers in 2004 and 2006 of 1.3 and 1.5 times GEH Embedded Value twice that of its current offer on just 0.7x EV.
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MrBear12
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24-May-2024 11:33     
 
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 Alert Admin 		Let it go. Let it be.
Que sera, sera.
What will be, will be.
The future' s not ours to see
Que sera sera

moonsun      ( Date: 24-May-2024 11:29) Posted:

Dont think will be successful..
i prepare to hold till pass on ..
Syodd
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moonsun
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24-May-2024 11:29     
 
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 Alert Admin 		Dont think will be successful..
i prepare to hold till pass on ..
Syodd
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chartiskao
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24-May-2024 08:01     
 
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 Alert Admin 		OCBC, Southeast Asia&rsquo s second-largest bank, made offers over the years to increase its stake in Great Eastern, first in 2004, followed by 2006.
For both past attempts by OCBC, Morgan Stanley had advised Great Eastern. In 2004, the US bank said that OCBC&rsquo s offer was adequate but not compelling.
OCBC' s Pursuit of Great Eastern Holdings

Background:

Over the years, OCBC Bank, Southeast Asia' s second-largest bank, has made multiple attempts to increase its stake in Great Eastern Holdings, a leading insurance company in the region. These attempts reflect OCBC&rsquo s strategic aim to strengthen its business pillars in banking, wealth management, and insurance, creating a more integrated financial services group.

Historical Offers:

  1. 2004 Attempt:
    • Offer Details: OCBC made an offer to acquire a larger stake in Great Eastern Holdings.
    • Advisor' s Opinion: Morgan Stanley, acting as Great Eastern&rsquo s advisor, opined that while OCBC&rsquo s offer was adequate, it was not compelling enough to warrant acceptance.
    • Outcome: The offer did not result in a significant increase in OCBC&rsquo s stake.
  2. 2006 Attempt:
    • Follow-Up Offer: Two years later, OCBC renewed its efforts with another offer to increase its stake in Great Eastern.
    • Advisory Role: Again, Morgan Stanley advised Great Eastern, playing a crucial role in evaluating the fairness and attractiveness of OCBC&rsquo s offer.
    • Outcome: Similar to the previous attempt, the offer did not meet the threshold for a compelling deal as determined by Great Eastern&rsquo s advisors and stakeholders.

Strategic Implications for OCBC:

  1. Enhancing Business Synergy:
    • Integrated Financial Services: By increasing its stake in Great Eastern, OCBC aims to create a more integrated financial services group, leveraging synergies between banking, wealth management, and insurance.
    • Cross-Selling Opportunities: A closer relationship with Great Eastern allows OCBC to offer a wider range of financial products to its customers, enhancing cross-selling opportunities and customer retention.
  2. Strengthening Market Position:
    • Regional Dominance: Enhancing its stake in a leading insurance firm like Great Eastern helps OCBC solidify its position in the regional financial services market, providing a competitive edge against other major players.
    • Diversification: Increased exposure to the insurance sector diversifies OCBC&rsquo s revenue streams, reducing dependency on traditional banking income and providing stability during economic fluctuations.
  3. Financial Performance and Growth:
    • Profit Contribution: As Great Eastern continues to perform well, contributing significant profits to OCBC&rsquo s overall financials, increasing its stake would directly boost OCBC&rsquo s profitability.
    • Long-Term Value Creation: Owning a larger share of a growing and profitable insurance business aligns with OCBC&rsquo s long-term strategic goals of value creation for shareholders.

Challenges and Considerations:

  1. Valuation and Offer Compellingness:
    • Adequate vs. Compelling Offers: While OCBC&rsquo s offers were deemed adequate, they failed to be compelling enough for Great Eastern&rsquo s stakeholders. Future attempts would need to address valuation concerns and present a stronger value proposition.
    • Negotiation Dynamics: Successful acquisition often involves navigating complex negotiation dynamics, balancing shareholder expectations, and aligning strategic interests.
  2. Regulatory and Market Conditions:
    • Regulatory Approval: Any significant stake increase in a major financial entity like Great Eastern requires regulatory approval, which can be a complex and time-consuming process.
    • Market Sentiment: The overall market conditions and investor sentiment towards mergers and acquisitions in the financial sector play a crucial role in determining the success of such offers.

Conclusion:

OCBC&rsquo s attempts to increase its stake in Great Eastern Holdings highlight its strategic intent to bolster its integrated financial services model. While previous offers were not compelling enough, the pursuit underscores the importance of strategic acquisitions in enhancing business synergies and market positioning. Moving forward, OCBC will need to craft more attractive offers and navigate regulatory and market challenges to achieve its strategic objectives.
 
 

 

chartiskao      ( Date: 24-May-2024 07:59) Posted:

https://ceomorningbrief.theedgemalaysia.com/2024/0769/

FairShake      ( Date: 22-May-2024 20:32) Posted:

Voluntary Delisting and Privatisation                                                                                                                                                                                                          2/2
OCBC made the VUGO &ldquo with the view to delisting GEH from SGX-ST&rdquo .   Under SGX Rulebook Mainboard Rules 1307:
&ldquo The Exchange may agree to an application by an issuer to delist from the Exchange if:
(1) the issuer convenes a general meeting to obtain shareholder approval for the delisting and
(2) the resolution to delist the issuer has been approved by a majority of at least 75% of the total number of issued shares excluding treasury shares and subsidiary holdings held by the shareholders present and voting, on a poll, either in person or by proxy at the meeting. The Offeror Concert Party Group must abstain from voting on the resolution.&rdquo
https://rulebook.sgx.com/rulebook/1307-0
No doubt this is a high threshold to surmount but the &ldquo Le Miserables&rdquo Lees and Wongs of 2004 and 2006 are getting on and their heirs might be willing to cash in at a decent price.
Further under Rule 1309: &ldquo If an issuer is seeking to delist from the Exchange:
(1) an exit offer must be made to the issuer' s shareholders and holders of any other classes of listed securities to be delisted. The exit offer must:
(a) be fair and reasonable and
(b) include a cash alternative as the default alternative and
(2) the issuer must appoint an independent financial adviser to advise on the exit offer and the independent financial adviser must opine that the exit offer is fair and reasonable.
In Boustead Project&rsquo s case, the final offer of $0.95 closed on 27 Mar 23 with 95.5% acceptance level, and the SGX DIRECTED exit offer of $1.15 was made nearly 9 months later on 14 Nov 23 after several extensions.
https://links.sgx.com/FileOpen/Joint%20Announcement%20-%20Directed%20Delisting%20and%20Exit%20Offer-14.11.2023.ashx?App=Announcement& FileID=778020

 
 
Watch and Be Ready
The wording of the Offer Document (OD) is extremely important, none more so than the word FINAL.  It is expected no later than 31 May 24.  The $25.60 is likely to be just an opening offer, not final.
Next, the IFA recommendations by GEH.  The offer is likely to be deemed REASONABLE given the discounts to the various price matrix and poor liquidity.   Crucially, FAIRness will hinge on its assessment of offer price relative to the Embedded Value of GEH.
https://www.mas.gov.sg/-/media/MAS/resource/sic/Practice-Statements/IFA-Practice-Statement13072020-clean.pdf?la=en& hash=B17E00B81E2AF4CDC522607656AF19282E443146
Keep track of the acceptance levels, as and when they are updated and reported.
There is no recommendations, whatsoever, on whether to wait, accept or reject the offer as each investor&rsquo s circumstance is different and unique.
Nonetheless, it is paramount that every retail investor must have online access to CDP.  With it and assuming internet access and website running smoothly, acceptance can be effected easily and immediately at the click of a button, even on the last day of the final closing date.
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chartiskao
Elite
24-May-2024 07:59     
 
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 Alert Admin 		https://ceomorningbrief.theedgemalaysia.com/2024/0769/

FairShake      ( Date: 22-May-2024 20:32) Posted:

Voluntary Delisting and Privatisation                                                                                                                                                                                                          2/2
OCBC made the VUGO &ldquo with the view to delisting GEH from SGX-ST&rdquo .   Under SGX Rulebook Mainboard Rules 1307:
&ldquo The Exchange may agree to an application by an issuer to delist from the Exchange if:
(1) the issuer convenes a general meeting to obtain shareholder approval for the delisting and
(2) the resolution to delist the issuer has been approved by a majority of at least 75% of the total number of issued shares excluding treasury shares and subsidiary holdings held by the shareholders present and voting, on a poll, either in person or by proxy at the meeting. The Offeror Concert Party Group must abstain from voting on the resolution.&rdquo
https://rulebook.sgx.com/rulebook/1307-0
No doubt this is a high threshold to surmount but the &ldquo Le Miserables&rdquo Lees and Wongs of 2004 and 2006 are getting on and their heirs might be willing to cash in at a decent price.
Further under Rule 1309: &ldquo If an issuer is seeking to delist from the Exchange:
(1) an exit offer must be made to the issuer' s shareholders and holders of any other classes of listed securities to be delisted. The exit offer must:
(a) be fair and reasonable and
(b) include a cash alternative as the default alternative and
(2) the issuer must appoint an independent financial adviser to advise on the exit offer and the independent financial adviser must opine that the exit offer is fair and reasonable.
In Boustead Project&rsquo s case, the final offer of $0.95 closed on 27 Mar 23 with 95.5% acceptance level, and the SGX DIRECTED exit offer of $1.15 was made nearly 9 months later on 14 Nov 23 after several extensions.
https://links.sgx.com/FileOpen/Joint%20Announcement%20-%20Directed%20Delisting%20and%20Exit%20Offer-14.11.2023.ashx?App=Announcement& FileID=778020

 
 
Watch and Be Ready
The wording of the Offer Document (OD) is extremely important, none more so than the word FINAL.  It is expected no later than 31 May 24.  The $25.60 is likely to be just an opening offer, not final.
Next, the IFA recommendations by GEH.  The offer is likely to be deemed REASONABLE given the discounts to the various price matrix and poor liquidity.   Crucially, FAIRness will hinge on its assessment of offer price relative to the Embedded Value of GEH.
https://www.mas.gov.sg/-/media/MAS/resource/sic/Practice-Statements/IFA-Practice-Statement13072020-clean.pdf?la=en& hash=B17E00B81E2AF4CDC522607656AF19282E443146
Keep track of the acceptance levels, as and when they are updated and reported.
There is no recommendations, whatsoever, on whether to wait, accept or reject the offer as each investor&rsquo s circumstance is different and unique.
Nonetheless, it is paramount that every retail investor must have online access to CDP.  With it and assuming internet access and website running smoothly, acceptance can be effected easily and immediately at the click of a button, even on the last day of the final closing date.
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FairShake
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22-May-2024 20:32     
 
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 Alert Admin 		Voluntary Delisting and Privatisation                                                                                                                                                                                                          2/2
OCBC made the VUGO &ldquo with the view to delisting GEH from SGX-ST&rdquo .   Under SGX Rulebook Mainboard Rules 1307:
&ldquo The Exchange may agree to an application by an issuer to delist from the Exchange if:
(1) the issuer convenes a general meeting to obtain shareholder approval for the delisting and
(2) the resolution to delist the issuer has been approved by a majority of at least 75% of the total number of issued shares excluding treasury shares and subsidiary holdings held by the shareholders present and voting, on a poll, either in person or by proxy at the meeting. The Offeror Concert Party Group must abstain from voting on the resolution.&rdquo
https://rulebook.sgx.com/rulebook/1307-0
No doubt this is a high threshold to surmount but the &ldquo Le Miserables&rdquo Lees and Wongs of 2004 and 2006 are getting on and their heirs might be willing to cash in at a decent price.
Further under Rule 1309: &ldquo If an issuer is seeking to delist from the Exchange:
(1) an exit offer must be made to the issuer' s shareholders and holders of any other classes of listed securities to be delisted. The exit offer must:
(a) be fair and reasonable and
(b) include a cash alternative as the default alternative and
(2) the issuer must appoint an independent financial adviser to advise on the exit offer and the independent financial adviser must opine that the exit offer is fair and reasonable.
In Boustead Project&rsquo s case, the final offer of $0.95 closed on 27 Mar 23 with 95.5% acceptance level, and the SGX DIRECTED exit offer of $1.15 was made nearly 9 months later on 14 Nov 23 after several extensions.
https://links.sgx.com/FileOpen/Joint%20Announcement%20-%20Directed%20Delisting%20and%20Exit%20Offer-14.11.2023.ashx?App=Announcement& FileID=778020

 
 
Watch and Be Ready
The wording of the Offer Document (OD) is extremely important, none more so than the word FINAL.  It is expected no later than 31 May 24.  The $25.60 is likely to be just an opening offer, not final.
Next, the IFA recommendations by GEH.  The offer is likely to be deemed REASONABLE given the discounts to the various price matrix and poor liquidity.   Crucially, FAIRness will hinge on its assessment of offer price relative to the Embedded Value of GEH.
https://www.mas.gov.sg/-/media/MAS/resource/sic/Practice-Statements/IFA-Practice-Statement13072020-clean.pdf?la=en& hash=B17E00B81E2AF4CDC522607656AF19282E443146
Keep track of the acceptance levels, as and when they are updated and reported.
There is no recommendations, whatsoever, on whether to wait, accept or reject the offer as each investor&rsquo s circumstance is different and unique.
Nonetheless, it is paramount that every retail investor must have online access to CDP.  With it and assuming internet access and website running smoothly, acceptance can be effected easily and immediately at the click of a button, even on the last day of the final closing date.
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FairShake
Member
22-May-2024 20:30     
 
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 Alert Admin 		Let me state categorically at the onset, I am NOT a lawyer or officially trained in any aspect of law to offer any legal advice or opinion.  I hereby disclaim any potential/realized losses or damages you may have suffered as a result from reading, or acting on, this post.  Please Do Your Own Due Diligence and consult your own legal and financial advisors.
The Opening Offer
&ldquo The OCBC offer works out at a premium of 36.9% above GEH&rsquo s undisturbed price as of May 9, a 40% premium to GEH&rsquo s three-month volume-weighted average price (VWAP) but just a 27.7% premium to GEH&rsquo s five-year VWAP.  In terms of valuation, OCBC is offering just 0.7 times embedded value of $36.59 but 1.54 times P/B.&rdquo   The Edge Issue 1138
Unlike some other GOs (eg Amara Holdings Limited), there was NO mention about the offer being FINAL in any of the SGX announcements and Investor Presentation by OCBC on 10 May 24.  This is done deliberately to accord itself the flexibility of revising it depending on the acceptance levels in the coming days.  Hence, the Opening Offer.
Given the perennial undervaluation of GEH, the premia of the opening offer on recent prices and 1mth-to-5Yrs VWAPs are a given. 
https://www.ocbc.com/iwov-resources/sg/ocbc/gbc/pdf/investors/major-regulatory/2024/investor_presentation_10may2024.pdf  Page 4
Interesting, 6 years ago the price hit $31.60 on 19 Apr 2018, just outside the 5yr VWAP used.
However, the offer falls well short when measured against GEH&rsquo s Embedded Value, a matrix on which life insurance companies are commonly evaluated.  This 30% discount to EV is all the more jarring when compared to the OCBC&rsquo s previous offers for GEH of 30% and 50% premia in 2004 and 2006 respectively.
Closing Dates and Price Revisions
The Offer Document will be dispatched no later than 31 May 24. It must remain open for the following 28 days for GEH shareholders to accept.  Each extension, if any, will be for 14 days from the date of that announcement.  It may or may not be accompanied with price revision(s).
Please note that &ldquo A circular (the &ldquo Offeree Circular&rdquo ) containing, inter alia, the advice of the IFA and the recommendation of the Independent Directors in respect of the Offer will be despatched by GEH to Shareholders within 14 days from the date of despatch of the Offer Document to be issued by the Offeror.&rdquo   In other words, no action is required until the IFA sings.
https://links.sgx.com/FileOpen/20240510_Response%20to%20Offer.ashx?App=Announcement& FileID=802908  GEH Response

 
Compulsory Acquisition Section 215(1)
&ldquo An offerer (OCBC) who acquires not less than 90 percent of the issued shares in the target
company (GEH) pursuant to a take-over offer (excluding those shares held at the date of the
offer by, or by a nominee for, the offerer or its related corporations) is entitled to
compulsorily acquire any remaining target shares under Section 215 of the Companies
Act. Conversely, dissenting shareholders of the target company have a right to be bought
out by the offerer if the offerer, its related corporations, and their respective nominees
hold 90 percent or more of the issued shares in the target company.&rdquo Italics-added context
https://www.allenandgledhill.com/media/1595/iba-takeover-guide-2017.pdf  A & G LLP Pg 23.
https://sso.agc.gov.sg/Act/CoA1967?ProvIds=P17-#pr215-
In several of the recent local GOs, offerors have set up NEW entities with zero shareholdings in the target company to circumvent the 90% threshold of S215(1).
OCBC, for whatever reasons, has to launch the VUGO with 88.44% stake in GEH already in the bag.  Hence, it would need to acquire 90% of the 54,732,310 or 49,259,079 share in free float to be entitled to S215. Or just 5,473,231 shares hold-out needed to sink S215.
10% Free Float and Suspension
OCBC&rsquo s Investor Presentation and SGX announcements &ldquo conceded&rdquo to this mission impossible just as much.  Instead, the indicated and probable chosen path for it to privatise GEH after two previous failed attempts is by going the delisting route.
It is quite possible for OCBC to acquire 1.56% or 7,400,403 shares during the VUGO.  This will reduce the free float of GEH to below 90% and lead to a suspension SGX, but only at the close of the offer.
&ldquo 1303(1) If the percentage of an issuer' s total number of issued shares excluding treasury shares held in public hands falls below 10%, as provided in Rule 723. In a take-over situation, where the Offeror succeeds in garnering acceptances exceeding 90% of the issuer' s total number of issued shares excluding treasury shares, thus causing the percentage of an issuer' s total number of issued shares excluding treasury shares held in public hands to fall below 10%, the Exchange will suspend trading of the listed securities of the issuer only at the close of the take-over offer.&rdquo
https://rulebook.sgx.com/rulebook/1301-0
When a company listed on the SGX-ST is suspended, its shares cannot be transacted but any dividends declared will still be paid out.  This undesirous animated state, even to OCBC, is just the precursor of the ultimate aim of privatization.
                                                                                                                                                                                                                                                                                                                                            1/2
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Godwinlow
Elite
22-May-2024 10:29     
 
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 Alert Admin 		Great Easten shareholders pls sign the petition to OCBC 

https://chng.it/kzhB2XhGvD

Do take a look and help circulate to OCBC and GEH shareholders.  Thanks
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MrBear12
Supreme
17-May-2024 09:31     
 
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 Alert Admin 		Tokio Marine to merge with GE?

SlothSG      ( Date: 17-May-2024 08:47) Posted:

Wonderful suggestion, to " allow other overseas players ........to bid for GE to allow its fair value" .
No low ball pls. 

chartiskao      ( Date: 16-May-2024 09:21) Posted:

allow other overseas players like the Japanese banks to bid for GE to allow its fair value
GEH' s financial results indeed showcase a robust performance, with significant growth in net profit and dividends, along with impressive metrics in new sales and embedded value. Its established presence in the insurance industry, coupled with its extensive customer base and historical profitability, makes it an appealing acquisition target for OCBC.
OCBC' s decision to acquire GEH aligns with its strategic vision of becoming a prominent player in Asia' s wealth management sector. By integrating GEH' s life insurance expertise with OCBC' s banking and wealth management services, the acquisition aims to offer comprehensive and tailored insurance solutions to a broader customer base. This strategic synergy is expected to enhance OCBC' s returns and optimize capital utilization.
Moreover, the acquisition is projected to be earnings accretive for OCBC, leveraging GEH' s substantial contribution to net profit over the past decade. This contribution, constituting a notable portion of OCBC' s total net profit, underscores the potential financial benefits of the acquisition. Despite utilizing internal cash for the offer, OCBC anticipates maintaining a strong capital position, assuring stakeholders of its financial stability post-acquisition.
Overall, the acquisition of GEH presents a strategic opportunity for OCBC to bolster its wealth management capabilities, capitalize on synergies, and enhance shareholder value. With GEH' s strong performance and market position, coupled with OCBC' s strategic vision and financial strength, the acquisition appears to be a prudent move for both entities.
 
 
 
 
 


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SlothSG
Senior
17-May-2024 08:47     
 
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 Alert Admin 		Wonderful suggestion, to " allow other overseas players ........to bid for GE to allow its fair value" .
No low ball pls. 

chartiskao      ( Date: 16-May-2024 09:21) Posted:

allow other overseas players like the Japanese banks to bid for GE to allow its fair value
GEH' s financial results indeed showcase a robust performance, with significant growth in net profit and dividends, along with impressive metrics in new sales and embedded value. Its established presence in the insurance industry, coupled with its extensive customer base and historical profitability, makes it an appealing acquisition target for OCBC.
OCBC' s decision to acquire GEH aligns with its strategic vision of becoming a prominent player in Asia' s wealth management sector. By integrating GEH' s life insurance expertise with OCBC' s banking and wealth management services, the acquisition aims to offer comprehensive and tailored insurance solutions to a broader customer base. This strategic synergy is expected to enhance OCBC' s returns and optimize capital utilization.
Moreover, the acquisition is projected to be earnings accretive for OCBC, leveraging GEH' s substantial contribution to net profit over the past decade. This contribution, constituting a notable portion of OCBC' s total net profit, underscores the potential financial benefits of the acquisition. Despite utilizing internal cash for the offer, OCBC anticipates maintaining a strong capital position, assuring stakeholders of its financial stability post-acquisition.
Overall, the acquisition of GEH presents a strategic opportunity for OCBC to bolster its wealth management capabilities, capitalize on synergies, and enhance shareholder value. With GEH' s strong performance and market position, coupled with OCBC' s strategic vision and financial strength, the acquisition appears to be a prudent move for both entities.
 
 
 
 
 


chartiskao      ( Date: 16-May-2024 09:18) Posted:

A non so attrracctive takeover offer of $25.60 by OCBC

  strong set of results for GEH

With this in mind, let&rsquo s take a peek at GEH&rsquo s financial results to determine if OCBC made a wise move.
In 2023, GEH saw its net profit climb 27% year on year to S$774.6 million.
The insurer declared a final  dividend  of S$0.40, taking its total 2023 dividend to S$0.75, up from S$0.65 a year ago.
For 1Q 2024, GEH saw total weighted new sales jump 34% year on year to S$524.2 million while new business embedded value rose 21% year on year to S$163.2 million.
The group&rsquo s net profit continued to rise, improving by 26% year on year to S$306.7 million.

A sprawling enterprise

GEH is a big name in Asia&rsquo s insurance industry with more than 16 million policyholders across Singapore and Malaysia (see below).

Source: OCBC&rsquo s offer for Great Eastern &ndash Presentation Slides
The insurer also has more than 115 years of operating history and is a storied name in the industry.
The markets that it targets (Singapore and Malaysia) have a total combined population of 40 million along with a gross domestic product of more than US$900 billion.
These attributes make GEH attractive as the insurer not only boasts a strong franchise but also enjoys structural tailwinds that will enable it to grow further.

Offer backed by solid reasons

OCBC also offered several reasons as to why it decided to buy up all the shares of GEH.
The first is to reinforce its strategic vision to become Asia&rsquo s leading wealth management player.
This move is in line with OCBC&rsquo s rebranded corporate strategy to strengthen its key pillars of banking, wealth management, and insurance.
With GEH being an established market leader for life insurance, OCBC shares a synergistic relationship with the insurer.
OCBC can tap GEH to offer a comprehensive suite of customised insurance solutions while GEH leverages OCBC&rsquo s extensive retail and commercial customer base.
Management also argues that this offer will enhance OCBC&rsquo s returns and help to optimise capital.
Assuming the offer goes through, it will be earnings accretive to OCBC as GEH has contributed an average of S$700 million in net profit annually to the bank over the past decade.
This level of profit equates to around 15% of OCBC&rsquo s total net profit for the period.
The offer will also raise OCBC&rsquo s 2023 return on equity (ROE) by 0.2 percentage points to hit 14% while its CET1 (Capital Adequacy) Ratio will fall to 15.3%.
Management also assures that OCBC&rsquo s capital position will remain strong following the offer even though the  blue-chip  bank will use solely internal cash to fund the offer.



 
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SlothSG
Senior
17-May-2024 07:34     
 
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 Alert Admin 		Thanks for sharing. 
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chartiskao
Elite
16-May-2024 22:24     
 
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 Alert Admin 		Despite trading at a premium to some of its listed peers, OCBC&rsquo s offer price at 0.7 times embedded value makes GEH the cheapest acquisition in the past 20 years. The second cheapest acquisition in the past 20 years is by HSBC of AXA at 0.8 times embedded value in 2021.
Some 20 years ago, OCBC paid almost twice the current valuation, at 1.3 times embedded value in 2004 and 1.5 times embedded value in 2006. While the 2004 offer comprised a share swap and a selective capital reduction, 2006&rsquo s offer was an all-cash deal.
In comparison, the most recent life insurance transaction was the acquisition of AmMetLife by none other than GEH. It paid AmBank RM1.2 billion ($344 million) for AmMetLife, which included a bancassurance agreement. In FY2023, AmMetLife had a net asset value and net profit of RM1 billion and RM76 million respectively. The GEH offer valued AmMet Life at about 1.1 times P/B and 14.5 times P/E although AmMetLife&rsquo s embedded value is not publicly available. 

 

SlothSG      ( Date: 13-May-2024 18:04) Posted:

Curious what does the sentence below mean on obtaining 75% of the shares held by independent shareholders after IFA report. Does this protect minority shareholders?

&zwnj &ldquo Singapore Exchange Regulation (SGX RegCo) said in 2019 that it would allow a company that is the subject of a general offer to delist only if the general offer is &ldquo fair and reasonable&rdquo , and the offeror has obtained at least 75 per cent of the shares held by independent shareholders&ldquo

Thanks!

Joelton      ( Date: 13-May-2024 15:34) Posted:

OCBC&rsquo s offer for Great Eastern is about responding to minority dissent, doubling down on its strategy
Deal may bring early end to the public conversation about how the two entities could be better run for minority investors
 
THIS column said last week that OCBC had three options to address the undervaluation of Great Eastern&rsquo s shares: it could organise a sale of the insurer, distribute a major portion of its stake to its own shareholders, or try once more to buy out all the insurer&rsquo s minority shareholders.
 
On Friday (May 10), OCBC unveiled a voluntary unconditional cash offer for all the shares it does not already own in Great Eastern, at S$25.60 per share.
 
This option hews closely to the bank&rsquo s longstanding narrative about Great Eastern being a strategic pillar of the group. In the short term, however, it may accentuate the fundamental misalignment of interest between OCBC and Great Eastern&rsquo s minority shareholders.
 
Great Eastern shares have languished for so long, and were trading so far below their intrinsic value, that the current offer price is bound to be a point of contention between OCBC and the insurer&rsquo s minority shareholders.
 
Even if OCBC improves its offer price in the weeks ahead, it seems unlikely it will be pushed high enough to leave Great Eastern&rsquo s long-suffering minorities feeling entirely satisfied.
 
The lender already holds 88.4 per cent of Great Eastern&rsquo s 473.3 million shares. Purchasing the remaining shares at the current offer price will cost about S$1.4 billion.
 
OCBC said this additional investment in Great Eastern will enhance its own return on equity (ROE) and optimise its common equity tier-1 (CET1) capital adequacy ratio.
 
One factor that clearly prompted it to take action now is the growing disgruntlement with the undervaluation of the insurer&rsquo s shares, which was beginning to raise questions about OCBC&rsquo s own strategy.
 
OCBC&rsquo s offer for Great Eastern is arguably as much about responding to the discontent with the insurer&rsquo s weak share price as it is about doubling down on its own strategy.
 
On a pro forma basis, subsuming all of Great Eastern would tighten OCBC&rsquo s 2023 CET1 ratio from 15.9 per cent to 15.3 per cent, and lift its 2023 ROE from 13.7 per cent to 14 per cent.
 
OCBC reported its results for Q1 2024 the same day it announced its offer for Great Eastern. Its earnings came in at S$1.98 billion, up 5 per cent year on year and 22 per cent quarter on quarter.
 
IFA key to delisting
OCBC&rsquo s offer price for Great Eastern is not compelling, in my view. While it is 36.9 per cent above Great Eastern&rsquo s last traded price before the offer was announced, it is 30 per cent below the insurer&rsquo s embedded value as at Dec 31.
 
Great Eastern is, however, very close to breaching the free float requirement of having at least 10 per cent of its shares in the hands of 500 members of the public. If the free float requirement is not met, trading in Great Eastern&rsquo s shares may be suspended.
 
OCBC has stated it intends to seek a delisting of Great Eastern in the event the free float requirement is not met. The lender needs to acquire only 7.4 million more shares in Great Eastern to push its stake in the insurer above the 90 per cent threshold.
 
Much really depends on whether the independent financial adviser (IFA) engaged by Great Eastern assesses OCBC&rsquo s offer to be &ldquo fair and reasonable&rdquo .
 
Singapore Exchange Regulation (SGX RegCo) said in 2019 that it would allow a company that is the subject of a general offer to delist only if the general offer is &ldquo fair and reasonable&rdquo , and the offeror has obtained at least 75 per cent of the shares held by independent shareholders.
 
Last year, trading in shares of Boustead Projects was suspended after an offer from Boustead Singapore left it in breach of the minimum required free float. The IFA appointed by Boustead Projects deemed the final offer at S$0.95 per share to be &ldquo not fair but reasonable&rdquo .
 
At the direction of SGX RegCo, Boustead Singapore subsequently made an exit offer for Boustead Projects at S$1.18 per share.
 
Market discipline
This column previously said one reason IFAs have waved through many seemingly inadequate offers &ndash for instance, offers for real estate companies at steep discounts to their net asset value (NAV) or revalued net asset value (RNAV) &ndash is because they did not use an appropriate valuation basis for public-listed companies moving into the private market.
 
Once a property company is taken private, it would be valued by investors and financiers on the basis of its NAV or RNAV. Offering to buy out minority shareholders of such a company at a big discount to these metrics would be plainly unfair.
 
By the same token, once Great Eastern is taken private, it would be valued by its owner on the basis of metrics such as embedded value or appraisal value. An offer to minority investors that values Great Eastern at a big discount to these metrics seems unfair to me.
 
The IFA that Great Eastern appoints should perhaps also critically examine the reasonableness of the offer from OCBC. For instance, it should look into the likelihood of more value being unlocked for Great Eastern&rsquo s shareholders via other means.
 
This brings me back to OCBC&rsquo s three options to address the undervaluation of Great Eastern&rsquo s shares. These were among many ideas that sprang up as the insurer&rsquo s minority shareholders began getting restless.
 
Over the last several weeks, a public conversation about how OCBC and Great Eastern could be better run for the benefit of minority investors has gradually widened.
 
Earlier this month, a letter to The Business Times from an OCBC shareholder argued that Great Eastern should not be absorbed in its entirety. The bank made a quick and detailed reply.
 
It would be a pity if OCBC&rsquo s offer for Great Eastern were to bring this conversation to an early end.
 
Being subjected to such market discipline can be uncomfortable for corporate boards, but it may lead to shareholders of public-listed companies being better served.
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chartiskao
Elite
16-May-2024 09:39     
 
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 Alert Admin
https://www.ocbc.com/iwov-resources/sg/ocbc/gbc/pdf/investors/quarterly-results/2023/fy23%20media%20release%20%20financial%20highlights.pdf
Using internal cash to fund the privatisation of Great Eastern suggests that OCBC is confident in its financial position and liquidity. By not resorting to external financing like debt or equity issuance, OCBC indicates that it has sufficient reserves to undertake this significant transaction without jeopardizing its capital adequacy or financial stability.
Describing themselves as " well-capitalised" implies that OCBC believes it has a strong enough capital base to absorb any potential risks or impacts associated with the privatisation. This could mean that they have ample reserves beyond regulatory requirements, providing them with a buffer to handle unexpected events or market fluctuations.
Overall, this strategy reflects OCBC' s confidence in its financial health and its commitment to the privatisation of Great Eastern.
 
 
 
 


chartiskao      ( Date: 16-May-2024 09:35) Posted:

Calculated from end-2023 figures, the offer would trim OCBC' s CET-1 CAR by 0.6 ppt to  15.3%. After adjusting for FY2023' s final dividend, the pro-forma CET-1 CAR as at end-2023 would fall to 14.5%. Taking 1QFY2024' s figures into account, however, OCBC would be starting from a higher base of 16.2%.6 days ago
https://www.ocbc.com/group/media/release/2024/ocbc-full-year-2023-net-profit-rose-27percent-to-a-record-7point02-billion.page


chartiskao      ( Date: 16-May-2024 09:31) Posted:

Raising OCBC' s offer to privatize Great Eastern shares could be compelling for several reasons:
  1. Maximizing Shareholder Value: Increasing the offer price could potentially enhance shareholder value for both OCBC and Great Eastern shareholders. A higher offer price may better reflect Great Eastern' s intrinsic value, ensuring that shareholders receive fair compensation for their shares.
  2. Competitive Advantage: In a competitive market, raising the offer price could help OCBC outbid potential competitors and secure the acquisition of Great Eastern. This could prevent rival companies from gaining control of Great Eastern and allow OCBC to capitalize on the strategic benefits of the acquisition.
  3. Stakeholder Support: A higher offer price may garner greater support from Great Eastern' s shareholders, including institutional investors and minority shareholders. This support could facilitate the successful completion of the privatization deal and minimize opposition or resistance from stakeholders.
  4. Financial Performance: If Great Eastern continues to demonstrate strong financial performance and growth prospects, raising the offer price may be justified to account for its increasing value. This could align with OCBC' s goal of acquiring a profitable and strategically valuable asset.
  5. Long-Term Strategy: Investing in Great Eastern at a higher valuation could be part of OCBC' s long-term strategic vision to expand its presence in the insurance and wealth management sectors. By paying a premium for Great Eastern' s shares, OCBC may position itself for future growth opportunities and strengthen its competitive position in the market.
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chartiskao
Elite
16-May-2024 09:35     
 
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 Alert Admin
Calculated from end-2023 figures, the offer would trim OCBC' s CET-1 CAR by 0.6 ppt to  15.3%. After adjusting for FY2023' s final dividend, the pro-forma CET-1 CAR as at end-2023 would fall to 14.5%. Taking 1QFY2024' s figures into account, however, OCBC would be starting from a higher base of 16.2%.6 days ago
https://www.ocbc.com/group/media/release/2024/ocbc-full-year-2023-net-profit-rose-27percent-to-a-record-7point02-billion.page


chartiskao      ( Date: 16-May-2024 09:31) Posted:

Raising OCBC' s offer to privatize Great Eastern shares could be compelling for several reasons:
  1. Maximizing Shareholder Value: Increasing the offer price could potentially enhance shareholder value for both OCBC and Great Eastern shareholders. A higher offer price may better reflect Great Eastern' s intrinsic value, ensuring that shareholders receive fair compensation for their shares.
  2. Competitive Advantage: In a competitive market, raising the offer price could help OCBC outbid potential competitors and secure the acquisition of Great Eastern. This could prevent rival companies from gaining control of Great Eastern and allow OCBC to capitalize on the strategic benefits of the acquisition.
  3. Stakeholder Support: A higher offer price may garner greater support from Great Eastern' s shareholders, including institutional investors and minority shareholders. This support could facilitate the successful completion of the privatization deal and minimize opposition or resistance from stakeholders.
  4. Financial Performance: If Great Eastern continues to demonstrate strong financial performance and growth prospects, raising the offer price may be justified to account for its increasing value. This could align with OCBC' s goal of acquiring a profitable and strategically valuable asset.
  5. Long-Term Strategy: Investing in Great Eastern at a higher valuation could be part of OCBC' s long-term strategic vision to expand its presence in the insurance and wealth management sectors. By paying a premium for Great Eastern' s shares, OCBC may position itself for future growth opportunities and strengthen its competitive position in the market.


chubbybastard      ( Date: 12-May-2024 05:46) Posted:

Ya lo. Its a really good offer liao. If shareholders play punk, OCBC can just buy 2% from market and trigger a mandatory takeover since tgey already own 88% of GE. Honestly if I were OCBC i will just buy the 2% from open market and offer like way lower price to the remaining 10
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chartiskao
Elite
16-May-2024 09:31     
 
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 Alert Admin 		Raising OCBC' s offer to privatize Great Eastern shares could be compelling for several reasons:
  1. Maximizing Shareholder Value: Increasing the offer price could potentially enhance shareholder value for both OCBC and Great Eastern shareholders. A higher offer price may better reflect Great Eastern' s intrinsic value, ensuring that shareholders receive fair compensation for their shares.
  2. Competitive Advantage: In a competitive market, raising the offer price could help OCBC outbid potential competitors and secure the acquisition of Great Eastern. This could prevent rival companies from gaining control of Great Eastern and allow OCBC to capitalize on the strategic benefits of the acquisition.
  3. Stakeholder Support: A higher offer price may garner greater support from Great Eastern' s shareholders, including institutional investors and minority shareholders. This support could facilitate the successful completion of the privatization deal and minimize opposition or resistance from stakeholders.
  4. Financial Performance: If Great Eastern continues to demonstrate strong financial performance and growth prospects, raising the offer price may be justified to account for its increasing value. This could align with OCBC' s goal of acquiring a profitable and strategically valuable asset.
  5. Long-Term Strategy: Investing in Great Eastern at a higher valuation could be part of OCBC' s long-term strategic vision to expand its presence in the insurance and wealth management sectors. By paying a premium for Great Eastern' s shares, OCBC may position itself for future growth opportunities and strengthen its competitive position in the market.


chubbybastard      ( Date: 12-May-2024 05:46) Posted:

Ya lo. Its a really good offer liao. If shareholders play punk, OCBC can just buy 2% from market and trigger a mandatory takeover since tgey already own 88% of GE. Honestly if I were OCBC i will just buy the 2% from open market and offer like way lower price to the remaining 10%

MrBear12      ( Date: 11-May-2024 21:15) Posted:

All OCBC needs to do is reach 90 per cent and compulsory delisting will occur.

Frankly, they can just acquire the slightly over 1% they need from the open market at a slight premium to their offer price before they hit that 90% figure.

Say goodbye to GE as a counter on SGX.

Happy Mother' s Day!
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chartiskao
Elite
16-May-2024 09:21     
 
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 Alert Admin 		allow other overseas players like the Japanese banks to bid for GE to allow its fair value
GEH' s financial results indeed showcase a robust performance, with significant growth in net profit and dividends, along with impressive metrics in new sales and embedded value. Its established presence in the insurance industry, coupled with its extensive customer base and historical profitability, makes it an appealing acquisition target for OCBC.
OCBC' s decision to acquire GEH aligns with its strategic vision of becoming a prominent player in Asia' s wealth management sector. By integrating GEH' s life insurance expertise with OCBC' s banking and wealth management services, the acquisition aims to offer comprehensive and tailored insurance solutions to a broader customer base. This strategic synergy is expected to enhance OCBC' s returns and optimize capital utilization.
Moreover, the acquisition is projected to be earnings accretive for OCBC, leveraging GEH' s substantial contribution to net profit over the past decade. This contribution, constituting a notable portion of OCBC' s total net profit, underscores the potential financial benefits of the acquisition. Despite utilizing internal cash for the offer, OCBC anticipates maintaining a strong capital position, assuring stakeholders of its financial stability post-acquisition.
Overall, the acquisition of GEH presents a strategic opportunity for OCBC to bolster its wealth management capabilities, capitalize on synergies, and enhance shareholder value. With GEH' s strong performance and market position, coupled with OCBC' s strategic vision and financial strength, the acquisition appears to be a prudent move for both entities.
 
 
 
 
 


chartiskao      ( Date: 16-May-2024 09:18) Posted:

A non so attrracctive takeover offer of $25.60 by OCBC

  strong set of results for GEH

With this in mind, let&rsquo s take a peek at GEH&rsquo s financial results to determine if OCBC made a wise move.
In 2023, GEH saw its net profit climb 27% year on year to S$774.6 million.
The insurer declared a final  dividend  of S$0.40, taking its total 2023 dividend to S$0.75, up from S$0.65 a year ago.
For 1Q 2024, GEH saw total weighted new sales jump 34% year on year to S$524.2 million while new business embedded value rose 21% year on year to S$163.2 million.
The group&rsquo s net profit continued to rise, improving by 26% year on year to S$306.7 million.

A sprawling enterprise

GEH is a big name in Asia&rsquo s insurance industry with more than 16 million policyholders across Singapore and Malaysia (see below).

Source: OCBC&rsquo s offer for Great Eastern &ndash Presentation Slides
The insurer also has more than 115 years of operating history and is a storied name in the industry.
The markets that it targets (Singapore and Malaysia) have a total combined population of 40 million along with a gross domestic product of more than US$900 billion.
These attributes make GEH attractive as the insurer not only boasts a strong franchise but also enjoys structural tailwinds that will enable it to grow further.

Offer backed by solid reasons

OCBC also offered several reasons as to why it decided to buy up all the shares of GEH.
The first is to reinforce its strategic vision to become Asia&rsquo s leading wealth management player.
This move is in line with OCBC&rsquo s rebranded corporate strategy to strengthen its key pillars of banking, wealth management, and insurance.
With GEH being an established market leader for life insurance, OCBC shares a synergistic relationship with the insurer.
OCBC can tap GEH to offer a comprehensive suite of customised insurance solutions while GEH leverages OCBC&rsquo s extensive retail and commercial customer base.
Management also argues that this offer will enhance OCBC&rsquo s returns and help to optimise capital.
Assuming the offer goes through, it will be earnings accretive to OCBC as GEH has contributed an average of S$700 million in net profit annually to the bank over the past decade.
This level of profit equates to around 15% of OCBC&rsquo s total net profit for the period.
The offer will also raise OCBC&rsquo s 2023 return on equity (ROE) by 0.2 percentage points to hit 14% while its CET1 (Capital Adequacy) Ratio will fall to 15.3%.
Management also assures that OCBC&rsquo s capital position will remain strong following the offer even though the  blue-chip  bank will use solely internal cash to fund the offer.



 

chartiskao      ( Date: 14-May-2024 18:20) Posted:

https://links.sgx.com/FileOpen/OCBC_priced_US$500million_of_Tier_2_Subordinated_Notes.ashx?App=Announcement& FileID=80327
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chartiskao
Elite
16-May-2024 09:18     
 
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 Alert Admin 		A non so attrracctive takeover offer of $25.60 by OCBC

  strong set of results for GEH

With this in mind, let&rsquo s take a peek at GEH&rsquo s financial results to determine if OCBC made a wise move.
In 2023, GEH saw its net profit climb 27% year on year to S$774.6 million.
The insurer declared a final  dividend  of S$0.40, taking its total 2023 dividend to S$0.75, up from S$0.65 a year ago.
For 1Q 2024, GEH saw total weighted new sales jump 34% year on year to S$524.2 million while new business embedded value rose 21% year on year to S$163.2 million.
The group&rsquo s net profit continued to rise, improving by 26% year on year to S$306.7 million.

A sprawling enterprise

GEH is a big name in Asia&rsquo s insurance industry with more than 16 million policyholders across Singapore and Malaysia (see below).

Source: OCBC&rsquo s offer for Great Eastern &ndash Presentation Slides
The insurer also has more than 115 years of operating history and is a storied name in the industry.
The markets that it targets (Singapore and Malaysia) have a total combined population of 40 million along with a gross domestic product of more than US$900 billion.
These attributes make GEH attractive as the insurer not only boasts a strong franchise but also enjoys structural tailwinds that will enable it to grow further.

Offer backed by solid reasons

OCBC also offered several reasons as to why it decided to buy up all the shares of GEH.
The first is to reinforce its strategic vision to become Asia&rsquo s leading wealth management player.
This move is in line with OCBC&rsquo s rebranded corporate strategy to strengthen its key pillars of banking, wealth management, and insurance.
With GEH being an established market leader for life insurance, OCBC shares a synergistic relationship with the insurer.
OCBC can tap GEH to offer a comprehensive suite of customised insurance solutions while GEH leverages OCBC&rsquo s extensive retail and commercial customer base.
Management also argues that this offer will enhance OCBC&rsquo s returns and help to optimise capital.
Assuming the offer goes through, it will be earnings accretive to OCBC as GEH has contributed an average of S$700 million in net profit annually to the bank over the past decade.
This level of profit equates to around 15% of OCBC&rsquo s total net profit for the period.
The offer will also raise OCBC&rsquo s 2023 return on equity (ROE) by 0.2 percentage points to hit 14% while its CET1 (Capital Adequacy) Ratio will fall to 15.3%.
Management also assures that OCBC&rsquo s capital position will remain strong following the offer even though the  blue-chip  bank will use solely internal cash to fund the offer.



 

chartiskao      ( Date: 14-May-2024 18:20) Posted:

https://links.sgx.com/FileOpen/OCBC_priced_US$500million_of_Tier_2_Subordinated_Notes.ashx?App=Announcement& FileID=803270

chartiskao      ( Date: 14-May-2024 13:08) Posted:

http://www.aastocks.com/en/stocks/analysis/stock-aafn/01299/0/hk-stock-news/1
 
It is well known that Great Eastern Holdings  G07  0.08%  has an excess of risk-based capital (the equivalent of banks&rsquo capital adequacy ratios). And it is clear from its share price that it is trading at a steep discount to its embedded value, which comprises a combination of shareholders funds and the value of the in-force business. The latter is calculated using a form of discounted cash flow (DCF).
According to Ronnie Tan, GEH&rsquo s CFO, discount rates in both Malaysia and SIngapore were raised by 25 bps each. This, coupled with assumptions of higher medical claims in 2023 versus previous years impacting cash flow assumptions, caused the value of the in-force business to dip by 4.2% y-o-y in FY2023.
Against this background, embedded value fell by 3.2% y-o-y in FY2023 to $17.3 billion, or $36.59 per share. Shareholders funds dipped marginally to $6.74 billion. However, total equity rose by 10% y-o-y, translating in net asset value of $16.66 per share.      
Despite trading at one-year lows, AIA&rsquo s share price is still above its Dec 31, 2022 embedded value of US$57.38 per share. Why is AIA trading closer to its embedded value, at a premium, compared to GEH&rsquo s sharp discount?
Ong Chin Woo, a shareholder of GEH who has sent a letter to GEH&rsquo s board requesting that three resolutions be tabled at its AGM, believes it is because of the lack of liquidity. Oversea-Chinese Banking Corp holds 88% of GEH.
The three resolutions tabled by Ong are: To withhold 30% of Board of Directors&rsquo fees until GEH&rsquo s share price recovers to 0.8 times of its Embedded Value to replace OCBC shares in the current Executive Share Option Schemes for GEH' s management with GEH shares and to appoint an independent financial advisor to explore options to enhance GEH shareholders&rsquo value.
See also:  Despite hiccups, local banks stay resilient with STI well-supported
Moreover, Ong calculates that GEH has an excess of around $1.45 billion in risk-based capital, or around $3 per share. 
Enhancing GEH shareholders&rsquo value could be pretty straightforward. In GEH&rsquo s FY2023 AGM, the minority shareholders suggested giving GEH shares as a dividend-in-specie to OCBC shareholders. This would immediately create liquidity. OCBC shareholders unhappy with GEH shares could sell them in the market.
And, unlike CapitaLand Ascott Trust  HMN  -0.55%  , CDL Hospitality Trust and Keppel REIT, where an overhang was created via the distributions-in-specie, this is unlikely to be the case for GEH. There could even be a clamouring for a more liquid GEH from institutions, providing the insurer with the potential to get into indices such as the MSCI and Straits Times Index. OCBC&rsquo s shares would also be traded higher as the value of GEH shares rises as a result of just floating higher naturally.
See also:  Technically, DBS is overstretched on the upside
GEH&rsquo s share price may have found a floor at current levels. But its minority shareholders, OCBC and the Singapore market would be better served with a more liquid GEH which in turn would encourage other insurers to list here. FWD has aspirations to list but in Hong Kong. Singapore' s hub status could be enhanced if it is also an insurance hub. Would FWD view Singapore as an attractive listing venue?  
 


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chartiskao
Elite
14-May-2024 18:20     
 
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 Alert Admin 		https://links.sgx.com/FileOpen/OCBC_priced_US$500million_of_Tier_2_Subordinated_Notes.ashx?App=Announcement& FileID=803270

chartiskao      ( Date: 14-May-2024 13:08) Posted:

http://www.aastocks.com/en/stocks/analysis/stock-aafn/01299/0/hk-stock-news/1
 
It is well known that Great Eastern Holdings  G07  0.08%  has an excess of risk-based capital (the equivalent of banks&rsquo capital adequacy ratios). And it is clear from its share price that it is trading at a steep discount to its embedded value, which comprises a combination of shareholders funds and the value of the in-force business. The latter is calculated using a form of discounted cash flow (DCF).
According to Ronnie Tan, GEH&rsquo s CFO, discount rates in both Malaysia and SIngapore were raised by 25 bps each. This, coupled with assumptions of higher medical claims in 2023 versus previous years impacting cash flow assumptions, caused the value of the in-force business to dip by 4.2% y-o-y in FY2023.
Against this background, embedded value fell by 3.2% y-o-y in FY2023 to $17.3 billion, or $36.59 per share. Shareholders funds dipped marginally to $6.74 billion. However, total equity rose by 10% y-o-y, translating in net asset value of $16.66 per share.      
Despite trading at one-year lows, AIA&rsquo s share price is still above its Dec 31, 2022 embedded value of US$57.38 per share. Why is AIA trading closer to its embedded value, at a premium, compared to GEH&rsquo s sharp discount?
Ong Chin Woo, a shareholder of GEH who has sent a letter to GEH&rsquo s board requesting that three resolutions be tabled at its AGM, believes it is because of the lack of liquidity. Oversea-Chinese Banking Corp holds 88% of GEH.
The three resolutions tabled by Ong are: To withhold 30% of Board of Directors&rsquo fees until GEH&rsquo s share price recovers to 0.8 times of its Embedded Value to replace OCBC shares in the current Executive Share Option Schemes for GEH' s management with GEH shares and to appoint an independent financial advisor to explore options to enhance GEH shareholders&rsquo value.
See also:  Despite hiccups, local banks stay resilient with STI well-supported
Moreover, Ong calculates that GEH has an excess of around $1.45 billion in risk-based capital, or around $3 per share. 
Enhancing GEH shareholders&rsquo value could be pretty straightforward. In GEH&rsquo s FY2023 AGM, the minority shareholders suggested giving GEH shares as a dividend-in-specie to OCBC shareholders. This would immediately create liquidity. OCBC shareholders unhappy with GEH shares could sell them in the market.
And, unlike CapitaLand Ascott Trust  HMN  -0.55%  , CDL Hospitality Trust and Keppel REIT, where an overhang was created via the distributions-in-specie, this is unlikely to be the case for GEH. There could even be a clamouring for a more liquid GEH from institutions, providing the insurer with the potential to get into indices such as the MSCI and Straits Times Index. OCBC&rsquo s shares would also be traded higher as the value of GEH shares rises as a result of just floating higher naturally.
See also:  Technically, DBS is overstretched on the upside
GEH&rsquo s share price may have found a floor at current levels. But its minority shareholders, OCBC and the Singapore market would be better served with a more liquid GEH which in turn would encourage other insurers to list here. FWD has aspirations to list but in Hong Kong. Singapore' s hub status could be enhanced if it is also an insurance hub. Would FWD view Singapore as an attractive listing venue?  
 


Joelton      ( Date: 13-May-2024 15:34) Posted:

OCBC&rsquo s offer for Great Eastern is about responding to minority dissent, doubling down on its strategy
Deal may bring early end to the public conversation about how the two entities could be better run for minority investors
 
THIS column said last week that OCBC had three options to address the undervaluation of Great Eastern&rsquo s shares: it could organise a sale of the insurer, distribute a major portion of its stake to its own shareholders, or try once more to buy out all the insurer&rsquo s minority shareholders.
 
On Friday (May 10), OCBC unveiled a voluntary unconditional cash offer for all the shares it does not already own in Great Eastern, at S$25.60 per share.
 
This option hews closely to the bank&rsquo s longstanding narrative about Great Eastern being a strategic pillar of the group. In the short term, however, it may accentuate the fundamental misalignment of interest between OCBC and Great Eastern&rsquo s minority shareholders.
 
Great Eastern shares have languished for so long, and were trading so far below their intrinsic value, that the current offer price is bound to be a point of contention between OCBC and the insurer&rsquo s minority shareholders.
 
Even if OCBC improves its offer price in the weeks ahead, it seems unlikely it will be pushed high enough to leave Great Eastern&rsquo s long-suffering minorities feeling entirely satisfied.
 
The lender already holds 88.4 per cent of Great Eastern&rsquo s 473.3 million shares. Purchasing the remaining shares at the current offer price will cost about S$1.4 billion.
 
OCBC said this additional investment in Great Eastern will enhance its own return on equity (ROE) and optimise its common equity tier-1 (CET1) capital adequacy ratio.
 
One factor that clearly prompted it to take action now is the growing disgruntlement with the undervaluation of the insurer&rsquo s shares, which was beginning to raise questions about OCBC&rsquo s own strategy.
 
OCBC&rsquo s offer for Great Eastern is arguably as much about responding to the discontent with the insurer&rsquo s weak share price as it is about doubling down on its own strategy.
 
On a pro forma basis, subsuming all of Great Eastern would tighten OCBC&rsquo s 2023 CET1 ratio from 15.9 per cent to 15.3 per cent, and lift its 2023 ROE from 13.7 per cent to 14 per cent.
 
OCBC reported its results for Q1 2024 the same day it announced its offer for Great Eastern. Its earnings came in at S$1.98 billion, up 5 per cent year on year and 22 per cent quarter on quarter.
 
IFA key to delisting
OCBC&rsquo s offer price for Great Eastern is not compelling, in my view. While it is 36.9 per cent above Great Eastern&rsquo s last traded price before the offer was announced, it is 30 per cent below the insurer&rsquo s embedded value as at Dec 31.
 
Great Eastern is, however, very close to breaching the free float requirement of having at least 10 per cent of its shares in the hands of 500 members of the public. If the free float requirement is not met, trading in Great Eastern&rsquo s shares may be suspended.
 
OCBC has stated it intends to seek a delisting of Great Eastern in the event the free float requirement is not met. The lender needs to acquire only 7.4 million more shares in Great Eastern to push its stake in the insurer above the 90 per cent threshold.
 
Much really depends on whether the independent financial adviser (IFA) engaged by Great Eastern assesses OCBC&rsquo s offer to be &ldquo fair and reasonable&rdquo .
 
Singapore Exchange Regulation (SGX RegCo) said in 2019 that it would allow a company that is the subject of a general offer to delist only if the general offer is &ldquo fair and reasonable&rdquo , and the offeror has obtained at least 75 per cent of the shares held by independent shareholders.
 
Last year, trading in shares of Boustead Projects was suspended after an offer from Boustead Singapore left it in breach of the minimum required free float. The IFA appointed by Boustead Projects deemed the final offer at S$0.95 per share to be &ldquo not fair but reasonable&rdquo .
 
At the direction of SGX RegCo, Boustead Singapore subsequently made an exit offer for Boustead Projects at S$1.18 per share.
 
Market discipline
This column previously said one reason IFAs have waved through many seemingly inadequate offers &ndash for instance, offers for real estate companies at steep discounts to their net asset value (NAV) or revalued net asset value (RNAV) &ndash is because they did not use an appropriate valuation basis for public-listed companies moving into the private market.
 
Once a property company is taken private, it would be valued by investors and financiers on the basis of its NAV or RNAV. Offering to buy out minority shareholders of such a company at a big discount to these metrics would be plainly unfair.
 
By the same token, once Great Eastern is taken private, it would be valued by its owner on the basis of metrics such as embedded value or appraisal value. An offer to minority investors that values Great Eastern at a big discount to these metrics seems unfair to me.
 
The IFA that Great Eastern appoints should perhaps also critically examine the reasonableness of the offer from OCBC. For instance, it should look into the likelihood of more value being unlocked for Great Eastern&rsquo s shareholders via other means.
 
This brings me back to OCBC&rsquo s three options to address the undervaluation of Great Eastern&rsquo s shares. These were among many ideas that sprang up as the insurer&rsquo s minority shareholders began getting restless.
 
Over the last several weeks, a public conversation about how OCBC and Great Eastern could be better run for the benefit of minority investors has gradually widened.
 
Earlier this month, a letter to The Business Times from an OCBC shareholder argued that Great Eastern should not be absorbed in its entirety. The bank made a quick and detailed reply.
 
It would be a pity if OCBC&rsquo s offer for Great Eastern were to bring this conversation to an early end.
 
Being subjected to such market discipline can be uncomfortable for corporate boards, but it may lead to shareholders of public-listed companies being better served.
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