Wednesday, November 20th, 2024

Oversea-Chinese Banking Corp: Strategic Growth and Strong Dividend Commitment Enhance Investor Confidence

Date of Report: 3 October 2024
Broker: UOB Kay Hian


Dividend Policy Commitment

Oversea-Chinese Banking Corp (OCBC) is committed to maintaining a dividend payout ratio of 50% going forward. This commitment is expected to provide an attractive dividend yield of 6.1% for the year 2025.


Strategic Revenue Growth Initiatives

Management aims to deliver an incremental revenue of S$3 billion cumulatively over the period from 2023 to 2025. This will be driven by four key growth pillars:

  1. Asian wealth
  2. Trade and investment flows
  3. New economy
  4. Sustainable financing

Financial Performance and Capitalization

OCBC has positioned itself as the most well-capitalized bank in Singapore, with a Common Equity Tier 1 (CET-1) Capital Adequacy Ratio (CAR) of 15.5% as of the second quarter of 2024. This high level of capitalization provides the bank with the potential to deploy surplus capital for generating inorganic growth opportunities.


Market Outlook and Investment Strategy

The bank’s strategic initiatives aim to enhance its return on equity (ROE), targeting a range of 12-13%, with an additional 1 percentage point contribution expected from the incremental revenue of S$3 billion. The bank has successfully achieved its strategic targets for 2023, which reflects its effective management and operational capabilities.


Buy Recommendation and Target Price

UOB Kay Hian maintains a “BUY” recommendation for OCBC, with a target price of S$18.50. This target price is derived from a price-to-book (P/B) ratio of 1.38 for the year 2025, using the Gordon Growth Model with a return on equity of 12.4%, cost of equity of 9.0%, and growth rate of 0.0%.

Lotte Chemical Titan Q3 2024 Results: Widening Losses and Sector Challenges Ahead

Financial Analysis of Lotte Chemical Titan: A Comprehensive Review Financial Analysis of Lotte Chemical Titan: A Comprehensive Review Broker Name: Maybank Investment Bank Berhad Date of Report: November 7, 2024 Introduction In this report,...

UMS Holdings Q3 Earnings Miss: Outlook Improves, Upgraded to HOLD

UMS Holdings 3Q24 Financial Analysis UMS Holdings 3Q24 Financial Analysis Date: November 12, 2024 Broker: Maybank Research Pte Ltd Introduction UMS Holdings, a key player in the precision engineering industry, faced a challenging third...

Yangzijiang Shipbuilding: Strategic Expansion and Strong Financials Drive 29% Upside Potential

Introduction Yangzijiang Shipbuilding (YZJSB) continues to assert its dominance in the shipbuilding sector, and with its recent strategic investments and strong financial outlook, the company presents an attractive investment opportunity for potential investors. In...