Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Much Better Than Expected: Oversea Chinese Banking Corp. (OCBC.SP) [OCBC] posted 3Q20 net profit of SGD 1.0 bn, an SGD 298 mn (40.8%) increase on a linked quarter basis – well ahead of consensus. Two factors pushed the outperformance: 1) a somewhat justifiable SGD 400 mn (53.3%) decline in loss provisions (unlike DBS Group Holdings [DBS.SP]), as OCBC witnessed “negative”growth in net new NPLs; and 2) a 290 bp decline in its tax rate to 13.1%, which was additive to the bottom-line by SGD 36 mn or 3.6%;*Credit Improving In Reality: By our calculation, given the SGD 99 mn in net recoveries, we find that new new NPL growth was actually negative on an annualized basis at 2.3%. While we are ecstatic to see negative growth in net new NPLs on the back of strong net recoveries of previously charged off loans, we continue to believe that credit risk will remain elevated. As such, we find that reserves should be bolstered by SGD 288 mn – 25% of pre-tax results, which is a far cry from where currently DBS is; and*Insurance Weakness: Great Eastern Holdings (GE.SP) [Great Eastern] reported 3Q20 bottom-line results of SGD 287.9 mn, declining SGD 9.6 mn (3.2%) linked quarter. On an operating basis excluding market-related gains, the decline in profits was even more pronounced at SGD 24.6 mn or 9.4% over the period due to new business strain. New Business Embedded Value (NBEV) margins continued their descent to 37.0%  - down 1.1% linked quarter due a weaker Malaysian component. Management’s confidence is low and it anticipates the weaker economic environment to pose continued headwinds, and will reassess the dividend.

*Much Better Than Expected: Oversea Chinese Banking Corp. (OCBC.SP) [OCBC] posted 3Q20 net profit of SGD 1.0 bn, an SGD 298 mn (40.8%) increase on a linked quarter basis – well ahead of consensus. Two factors pushed the outperformance: 1) a somewhat justifiable SGD 400 mn (53.3%) decline in loss provisions (unlike DBS Group Holdings [DBS.SP]), as OCBC witnessed “negative”growth in net new NPLs; and 2) a 290 bp decline in its tax rate to 13.1%, which was additive to the bottom-line by SGD 36 mn or 3.6%;*Credit Improving In Reality: By our calculation, given the SGD 99 mn in net recoveries, we find that new new NPL growth was actually negative on an annualized basis at 2.3%. While we are ecstatic to see negative growth in net new NPLs on the back of strong net recoveries of previously charged off loans, we continue to believe that credit risk will remain elevated. As such, we find that reserves should be bolstered by SGD 288 mn – 25% of pre-tax results, which is a far cry from where currently DBS is; and*Insurance Weakness: Great Eastern Holdings (GE.SP) [Great Eastern] reported 3Q20 bottom-line results of SGD 287.9 mn, declining SGD 9.6 mn (3.2%) linked quarter. On an operating basis excluding market-related gains, the decline in profits was even more pronounced at SGD 24.6 mn or 9.4% over the period due to new business strain. New Business Embedded Value (NBEV) margins continued their descent to 37.0%  - down 1.1% linked quarter due a weaker Malaysian component. Management’s confidence is low and it anticipates the weaker economic environment to pose continued headwinds, and will reassess the dividend.

*Negative Operating Jaws Were A Surprise: DBS Group Holdings (DBS.SP) [DBS] reported 3Q20 results of SGD 1.3 bn, increasing SGD 50 mn (4.0%) on a linked quarter basis. Results were solely led on a justified SGD 295 mn (34.7%) reduction in loss provisions, which point to DBS’real challenges with negative operating jaws; and*Credit Risk Rising: By our calculation, and despite the net recovery of SGD 24 mn, we find that net new NPLs continue to increase – up SGD 272 mn or 18.9% on an annualized basis. Management too was less sanguine about credit quality on a go forward basis, expecting a re-acceleration of NPL formation in 2021 as COVID-19 government programs are set to expire. We feel that reserves should be shored up in the neighborhood of SGD 1.3 bn – amounting to a full quarter of results – and intimating this quarter was more managed than DBS would have the investment community believe.

*Negative Operating Jaws Were A Surprise: DBS Group Holdings (DBS.SP) [DBS] reported 3Q20 results of SGD 1.3 bn, increasing SGD 50 mn (4.0%) on a linked quarter basis. Results were solely led on a justified SGD 295 mn (34.7%) reduction in loss provisions, which point to DBS’real challenges with negative operating jaws; and*Credit Risk Rising: By our calculation, and despite the net recovery of SGD 24 mn, we find that net new NPLs continue to increase – up SGD 272 mn or 18.9% on an annualized basis. Management too was less sanguine about credit quality on a go forward basis, expecting a re-acceleration of NPL formation in 2021 as COVID-19 government programs are set to expire. We feel that reserves should be shored up in the neighborhood of SGD 1.3 bn – amounting to a full quarter of results – and intimating this quarter was more managed than DBS would have the investment community believe.      

DBS Group Holdings – Not Trending The Right Way Yet

Asia's Leading Online Property Group, PropertyGuru

Bjorn Sprengers

Asia's Leading Online Property Group

PropertyGuru

PropertyGuru Pte Ltd owns and operates a real estate property information website. The Company offers facilities to search for condominiums, apartments, Housing and Development Board (HDB) flats, serviced apartments, houses, and commercial properties to rent and buy in Singapore.

Thematic (Sector/Industry)

In Part 2 of our 4 part series we address the outlook for the rental market for private residential:<ul><li>The URA’s rental price index for private homes fell 10.6 percent between Q3 2013 and Q3 2016. Analysts are forecasting a significant drop in rents of up to 15 percent this year.</li><li>The volume of foreign manpower is still increasing but at a slower pace. The slowdown in the global economy and the volatility in some industries has resulted in numerous layoffs and renters tightening their belts.</li><li>Renters are expected to focus their attention on the OCR for good rental deals, as prices there fell the most by 6.7 percent in 2016.</li><li> Landlords are expected to provide more incentives to attract tenants, such as flexible lease terms and furnishings to prevent their units from being left vacant over long periods of time</li></ul>

In Part 2 of our 4 part series we address the outlook for the rental market for private residential:The URA’s rental price index for private homes fell 10.6 percent between Q3 2013 and Q3 2016. Analysts are forecasting a significant drop in rents of up to 15 percent this year.The volume of foreign manpower is still increasing but at a slower pace. The slowdown in the global economy and the volatility in some industries has resulted in numerous layoffs and renters tightening their belts.Renters are expected to focus their attention on the OCR for good rental deals, as prices there fell the most by 6.7 percent in 2016. Landlords are expected to provide more incentives to attract tenants, such as flexible lease terms and furnishings to prevent their units from being left vacant over long periods of time

Singapore Residential - Property Market Outlook - Green Shoots Emerging (Part 2 of 4)

In Part 1 of our 4 part series we address the outlook for the sales market for private residential:<ul><li>Private home prices in the Outside Central Region (OCR) are expected to drop by about 2.5 percent in 2017, down from 3.1 percent in 2016 and 3.7 percent in the year before.</li><li>Home buyer affordability will be affected by the ongoing cooling measures, particularly the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR).</li><li>In a bid to prevent an oversupply situation in the market, fewer government land sales sites will be released. This will cut the housing supply by a few thousand units in the next two years.</li><li>New private home sales are expected to reach about 8,000 units in 2017. Pent-up demand in the market is likely to contribute to better take-up rates at projects with good location and pricing attributes. </li></ul>

In Part 1 of our 4 part series we address the outlook for the sales market for private residential:Private home prices in the Outside Central Region (OCR) are expected to drop by about 2.5 percent in 2017, down from 3.1 percent in 2016 and 3.7 percent in the year before.Home buyer affordability will be affected by the ongoing cooling measures, particularly the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR).In a bid to prevent an oversupply situation in the market, fewer government land sales sites will be released. This will cut the housing supply by a few thousand units in the next two years.New private home sales are expected to reach about 8,000 units in 2017. Pent-up demand in the market is likely to contribute to better take-up rates at projects with good location and pricing attributes.   

Singapore Residential - Property Market Outlook - Green Shoots Emerging (Part 1 of 4)

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

We doubt there are many people who believe that China’s banks have especially safe corporate exposure. Few believe the low 1.8% NPL ratio that China’s banks report. So when NPLs and credit costs ratchet higher, it will hurt, but will not be totally unexpected. Singapore is the opposite extreme, and this is what is of real interest: where there is a giant gap between perception and reality. We turn to Google as a proxy on what the world believes.We note the number of results for the search “China…

We doubt there are many people who believe that China’s banks have especially safe corporate exposure. Few believe the low 1.8% NPL ratio that China’s banks report. So when NPLs and credit costs ratchet higher, it will hurt, but will not be totally unexpected. Singapore is the opposite extreme, and this is what is of real interest: where there is a giant gap between perception and reality. We turn to Google as a proxy on what the world believes.We note the number of results for the search “China…

Singapore Banks: A Far Greater Perception-Reality Gap Compared with China Banks

Singapore

UOB-Kay Hian Holdings Limited is an investment holding company whose subsidiaries provide management services.  The Company provides stock broking, futures broking, investment trading, nominee services, margin financing, and research activities.

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UOB Kay Hian Holdings (UOBK SP)

Oversea Chinese Banking Corp. – Solid

OVERSEA CHINESE BANKING CORP.: Credit Showing Signs Of Recovery With Negative NPL Growth - Offsetting Weakness In NIMs and Insurance.

Thomas J. Monaco

Singapore Residential - Property Market Outlook - Green Shoots Emerging (Part 2 of 4)

In Part 2 of our 4 part series we address the outlook for the rental market for private residential: The URA’s rental price index for private homes...

PropertyGuru

Singapore Residential - Property Market Outlook - Green Shoots Emerging (Part 1 of 4)

In Part 1 of our 4 part series we address the outlook for the sales market for private residential: Private home prices in the Outside Central...

PropertyGuru

Singapore Banks: A Far Greater Perception-Reality Gap Compared with China Banks

We doubt there are many people who believe that China’s banks have especially safe corporate exposure. Few believe the low 1.8% NPL ratio that...

Daniel Tabbush

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Oversea Chinese Banking Corp. – Solid

OVERSEA CHINESE BANKING CORP.: Credit Showing Signs Of Recovery With Negative NPL Growth - Offsetting Weakness In NIMs and Insurance.

Thomas J. Monaco

DBS Group Holdings – Not Trending The Right Way Yet

DBS GROUP HOLDINGS: Trends Are Poor. Costs Higher, Revenues Lower, and Provision Trend Likely To Be Reversed As We Head Into 2021.

Thomas J. Monaco

Singapore Residential - Property Market Outlook - Green Shoots Emerging (Part 2 of 4)

In Part 2 of our 4 part series we address the outlook for the rental market for private residential: The URA’s rental price index for private homes...

PropertyGuru

Singapore Residential - Property Market Outlook - Green Shoots Emerging (Part 1 of 4)

In Part 1 of our 4 part series we address the outlook for the sales market for private residential: Private home prices in the Outside Central...

PropertyGuru

Singapore Banks: A Far Greater Perception-Reality Gap Compared with China Banks

We doubt there are many people who believe that China’s banks have especially safe corporate exposure. Few believe the low 1.8% NPL ratio that...

Daniel Tabbush