OCBC upgraded UOB to Buy from Hold after the recent sell down in the stock, saying “value is emerging.”
“When we downgraded the stock to a Hold, we recommended investors to buy at S$29.00 or lower. Since then, the stock has dropped below S$28.00 recently,” it said in a note last week. “Based on an estimated dividend payout of S$1.00, current yield is at about 3.6 percent – and we deem this to be a good level.”
OCBC said it was sticking with its estimates, forecasting UOB’s 2018 net earnings at a record high of S$4.007 billion. It set a fair value of S$31.02 for the stock.
“With the improving market outlook, we are generally more optimistic about the operating environment for the Singapore banks. We expect
improving net interest margin to be a key feature this year,” OCBC said. It also pointed to the possibility of a higher dividend this year.
Shares of UOB ended Thursday at S$26.95, down 0.55 percent; the Singapore market was closed Friday for a holiday.
In a separate note, OCBC said that the outlook is improving for Singapore’s banks, with positive drivers intact despite equity market weakness.
“The outlook is definitely improving as the banking sector saw several quarters of improvement as allowances declined, non-performing loans plateaued and margins started to reverse up,” it said.
The recent stock-price weakness for the banks, which it attributed partly to the “lull period in May and June” may offer “an opportune time” to buy the shares, it said. It tipped DBS as its top sector pick.