Oversea-Chinese Banking Corp - Selling Its Stake in Hong Kong Life Insurance
- OCBC announced last night it has entered into a share sale agreement to sell it 33.33% stake in Hong Kong Life Insurance to First Origin International.
- The consideration for the sale is HKD2.367bn (~SGD426m) payable in cash. The unaudited NTA of HK Life was HKD793m as at 31Dec 2016. The sale is conditional upon regulatory approvals.
- The sale could give OCBC a one-time gain of HKD1.574bn (~SGD283m). This represents 8% of our forecast FY17 net profit of SGD3.46bn.
- Whilst this one-time gain would be a positive for OCBC’s financials, we remain concern on OCBC’s need for more loan loss provisioning from rising NPL ratio and falling values of its oil & gas loan collaterals.
- We have a NEUTRAL recommendation on OCBC with TP of SGD8.90 (8% downside from 20Mar close of SGD9.63), pegged to 1x 2017F P/BV.