OCBC's planned rights issue to finance its pricey acquisition of Wing Hang Bank may have reassured the market, but now the Singapore bank must overcome skepticism about the deal's merits.
"Looks good on paper, but devil is in execution," said Ng Wee Siang, an analyst at Maybank-Kim Eng, in a note Tuesday. "The market is likely to stay unconvinced until concrete results emerge," which will likely only be in the second half of next year, at the earliest, he said, adding he's "not taking a leap of faith" and keeping a "hold" call on the stock.
Late Monday, OCBC said it would raise around 3.3 billion Singapore dollars ($2.7 billion) via a one-for-eight rights issue of 440 million shares sold at 7.65 Singapore dollars a share, or a 25 percent discount to Friday's share price. The rights offer will top up the Singapore bank's balance sheet after its $5 billion takeover of Wing Hang. OCBC paid around 1.8 times the Hong Kong bank's price-to-book ratio, compared with most mainland Chinese banks trading at less than one times.