“We now judge these risks to have eased sufficiently to restore ‘low’ ratings. Share price volatility for the Singapore banks has also recently been consistent with a ‘low’ rating,” writes Makdad in an Aug 29 note.
Makdad’s fair value estimates remain unchanged at $48 for DBS Group Holdings, $18.50 for Oversea-Chinese Banking Corporation (OCBC) and $38 for United Overseas Bank (UOB).
Makdad has a two-star rating on DBS and four-star ratings on OCBC and UOB against Morningstar’s five-tier scale.
“With the reduction in uncertainty ratings, OCBC’s 10% discount is likely to shift it into four-star territory, compared with three stars under the ‘medium’ rating,” adds the Morningstar analyst.
When Makdad raised the rating of Singapore banks to ‘medium’ in April, he simultaneously lifted HSBC and Standard Chartered to ‘high’ from ‘medium’. Makdad reverted both to ‘medium’ at the end of July.
Shares in DBS closed 32 cents lower, or 0.63% down, at $50.20 on Sept 1; while shares in OCBC closed 1 cent higher, or 0.06% up, at $16.75 and shares in UOB closed 5 cents higher, or 0.14% up, at $35.24.
DBS shares have gained 14.2% year to date, while OCBC shares have risen 0.66% and UOB shares have fallen 3.6% over the same period.
