OCBC’s revised Great Eastern bid seen having limited financial impact: RHB

RHB maintained a ‘Neutral’ rating on OCBC with a target price of SGD17.50, representing a 7% upside.

OCBC Bank’s renewed bid to privatise Great Eastern Holdings (GE) is not expected to significantly impact its financial performance, according to brokerage RHB.

In a corporate note, RHB maintained a ‘Neutral’ rating on OCBC with a target price of SGD17.50, representing a 7% upside. The brokerage projected a dividend yield of 6.1% for FY2025 and forecasted a slight decline in return on equity from 13.4% in 2024 to 12.2% in 2025.

OCBC, which already owns 87.9% of GE, has increased its offer to $30.15 per share for the remaining 6.3% stake it does not own.

The revised offer marks a 17.8% increase from its previous bid of $25.60 and represents a 36% premium to GE’s last traded price of $22.18 before its shares were suspended in May 2024 due to its public float falling below the 10% minimum required by the Singapore Exchange.

To resolve the trading suspension, OCBC has proposed two options. The first is a full privatisation and delisting of GE, which would require the support of at least 75% of minority shareholders.

The second option involves restoring GE’s public float through a 1-for-1 bonus issue of listed ordinary shares to minority shareholders and unlisted Class C shares to OCBC, resulting in a public float of 11.8%.

RHB also highlighted OCBC’s strong sustainability performance, giving the bank an ESG score of 3.2 out of 4. OCBC received high marks in both environmental and governance categories.

As of end-2024, the bank had facilitated $71b in sustainable finance and remained carbon neutral for operational emissions since 2022. It also met its 2025 gender diversity goal early, with 42% of leadership roles already held by women in 2024.

Despite the strategic rationale behind the GE proposal, RHB noted potential risks to OCBC’s financial outlook, including higher credit costs and margin compression.

Conversely, stronger-than-expected non-interest income or tighter cost controls could provide upside. Overall, the brokerage views the proposal as a step to resolve regulatory issues at GE, but one with limited immediate financial impact for OCBC.