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waiting patiently...
On lower-low downtrend. Expect DBS to drop below its previous low of 18.70.
Good entry is at 17.90.
i am hoping for it to come to the level of 18.5. any willing seller?
DBS is trading at support level now. Looking at the chart support is S$19.1.
if it drop below this level...it may smell trouble.
why people expect the govt to come in and support? cos it is one of the 2 banks it can use for the control of forex...understand?
Merrill Lynch
ROSA lifts DBS?s CDO exposure to S$2.4bn
DBS has disclosed an additional S$1.1bn exposure to CDOs via an S$1.4bn ABCP conduit called ROSA (Red Orchid Secured Assets) to which the bank has provided a liquidity back-stop. This is not news per se as investors have been aware of this indirect exposure to CDOs since early last week. Given difficulties in the commercial paper market, it now expects to provide 100% liquidity funding to ROSA, which in turn means that the assets/credit risk will shift to DBS.
CDO exposure almost doubles; sub-prime unchanged
DBS's revised exposure is S$2.4bn, equal to 1.0% of assets and 12% of equity, after adding ROSA?s to the S$1.3bn (US$850mn) in CDOs already on the balance sheet. ROSA?s CDOs are mostly backed by corporate bonds, 98% are AAA-rated and there are no sub-prime mortgages, so appear to be above-average quality.
Expect S$300mn P&L charge for sub-prime mortgages
DBS's total exposure to US sub-prime mortgage CDOs is S$288m, which represents 12% of its total (revised) CDO exposure and 1.4% of its shareholders? equity. We assume a S$300mn charge to profits, in order to reflect 100% expected losses from its sub-prime exposure, which cuts our 2007 profit estimate by 10% (to S$2.23bn). Profits in 2008E and 2009E are unchanged.
Remain BUYers; PO: S$28 (37% upside)
We expect CDOs to have a moderate impact on DBS's profits. Therefore, the drop in DBS's market value of several times its gross CDO exposure exaggerates the likely damage to its long-term earnings power or capital ratios. We remain excited by Singapore's growth story which is predicated largely on domestic factors. Our PO of S$28 (37% upside) equates to a 2008E P/BV of 1.94x.
What is this ROSA conduit structure? Out of the total US$1.7bn of CDO-related structured products sold to investors by DBS, there was an S$1.4bn Conduit structure called ROSA (Red Orchid Secured Assets) that holds CDOs and is funded by commercial paper. The bank provided liquidity guarantees of up to 100% should funding not be available in the commercial paper market. This kind of liquidity support is common practice for Conduit structures. With the global commercial paper market facing unprecedented disruptions and rollovers becoming more difficult, DBS will now likely have to provide funding to the Conduit and thereby the credit risk would shift from the third party investors to the bank.
The Conduit holds S$1.4bn in total assets of which S$1.1bn is in CDOs and the remaining S$300mn in loans and bonds. The characteristics of the CDOs, according to management, are: 98% AAA-rated and 2% AA-rated, mostly corporate securities, 3% in ABS, but include no US sub-prime mortgages.
Why do we have the mentality that the government will come in to support the shares? If I was an investor with lots of money, I would hope to buy at a cheaper price and hold it for the long term.
No one can put a valuation on its CDO exposure in the US SUb prime. It could be worthless if those mortgages defaults on its payment. In the worst case scenario, DBS writes off $2.4 billions from its profit for 2007 to 2008.
What is it fair valuation then? Around $12 - $15 based on its current exposure.
With the US expected to slip into a recession, the markets will be expected to correct furthur. So, why not be a good steward of your money and wait patiently and pick up at a cheaper price. In the bad times, it has gone down as low to between $10-$12.
its pretty tempting to pick DBS up if it falls below $19...anyone having their eyes on this share too before it go up back to its 20dollars value again?...
some chart indicators are telling me on Tuesday is first sign of downtrend...but again DBS is well...a strong banking stock and its i m sure our government won't see it slip down too much too right?
exposure
(Adds spokeswoman and analyst comment, background)
By Saeed Azhar and Chua Baizhen
SINGAPORE, Aug 28 (Reuters) - Shares in Singapore's DBS Group Holdings
<DBSM.SI> fell almost 3 percent on Tuesday after the bank said it was
injecting cash into a special-purpose vehicle that invests in risky debt
such as collateralised debt obligations (CDOs).
The move came after investors balked at providing the S$1.4 billion
($921 million) vehicle with more short-term funding by rolling over their
investments, amid turmoil in global credit markets.
The DBS vehicle, "Red Orchid Secured Assets", which includes S$1.1
billion of CDOs with the rest in loans and bonds, leaves the bank with
nearly double the exposure to CDOs that it had initially declared.
Analysts said that as the debt matures and investors do not roll it
over, the exposure comes back on to DBS's books.
"Banks provide liquidity when they cannot find third parties to finance
such structures. Then the parent bank has to come in to provide liquidity,"
said Thilan Wickramasinghe, an analyst at CLSA.
Last week, CLSA said in a client note that DBS would have to provide
liquidity to the vehicle because investors holding the asset-backed
commercial paper would not renew their investment due to credit market
turmoil.
A spokeswoman for DBS <DBSM.SI>, Southeast Asia's biggest bank by
assets, said the bank had already injected some funds into the vehicle. She
did not provide details.
DBS said it had not shown the commercial paper in its direct exposure
to CDOs in an earlier disclosure because it believed it would continue to
be funded by investors. It said total exposure to CDOs made up only 1
percent of its overall assets.
"I think it is obvious disclosure could have been more prompt and more
comprehensive earlier," said Matthew Wilson, a banking analyst at Morgan
Stanley.
DBS's share price fall added to losses on Friday, when DBS first
confirmed to Reuters its extra exposure to the CDO market, and it took the
stock down 12 percent since the start of the year, versus a 12 percent gain
in the Straits Times Index <.STI>.
JPMorgan said in a note to clients that DBS was among the stocks it is
recommending investors to avoid.
"Singapore banks and Taiwan insurers appear to be the most at risk, and
we see no merit in owning these stocks," JPMorgan analyst Sunil Garg said.
RATINGS CUT
Singapore's United Overseas Bank <UOBH.SI> fell nearly 2 percent and
Oversea-Chinese Banking Corp <OCBC.SI> dropped 0.6 percent.
On Friday Singapore's central bank told banks for the second time this
month to take a close look at their books.
JPMorgan said that, with DBS's corporate bond portfolio of over S$10
billion classified as "held for trading", mark-to-market losses could
impact third-quarter earnings significantly.
On Tuesday Goldman Sachs cut its ratings for DBS to "neutral" from
"buy" and lowered its 12-month price target to S$24 from S$31, citing the
bank's exposure to CDOs. The stock was quoted at S$19.80 at 0827 GMT.
Goldman analyst Bok Chuan Tan said in a note to investors that while he
believed DBS's fundamentals remained strong and the share price correction
was overdone, he saw no near-term catalysts to mitigate the bank's CDO
exposure overhang.
($1=1.520 Singapore Dollar)
((Reporting by Saeed Azhar and Chua Baizhen, editing by Geert De Clercq
and Alan Raybould; saeed.azhar@reuters.com; Reuters Messaging:
saeed.azhar.reuters.com@reuters.net; +65 6403-5664))
DBS has the most exposure to Sub Prime ex Japan in Asia. While it claims that the holders will not default, it is not very reassuring. It has not come out to guarantee it. No one has the confidence with the sub prime issues. If massive mortgage defaulters in US, who is to pay for the CDOs?
So it is no surprise that many financial institutions including Temasek will put a hold in pumping money into it. There's a responsibility to share holders.
This one ok lah - even latest data
Only people make a lot of noise lah
Quotes:
Southeast Asia's biggest lender DBS Group Holdings said late Monday that it does not expect holders of its asset-backed commercial papers (ABCPs) to default.
The ABCPs are held under conduit Red Orchid Secured Assets (ROSA) and are part of the 2.4 billion Singapore dollars worth of commercial debt obligations held by the bank.
DBS surprised the market on Friday when it disclosed that its total CDO exposure was 2.4 billion Singapore dollars and not 1.3 billion as previously disclosed.
The bank said Monday that it did not previously include some 1.1 billion dollars in CDOs held under ROSA as part of its total CDO exposure on the assumption that ROSA would continue to be funded by investors. But some ABCP conduits, including ROSA , have had to draw on liquidity facilities provided by banks, including DBS, following the recent market volatility.
ROSA holds some 1.4 billion Singapore dollars in assets and DBS can fully provide funding for these assets if necessary, DBS said.
Despite the increased exposure, DBS said its exposure to the US subprime mortgage market remains insignificant.
"DBS has one of the strongest capital positions of banks operating in Asia and we have minimal exposure to the US subprime mortgage market, DBS Group chief financial officer Jeanette Wong said.
Of DBS's total CDO exposure of 2.4 billion Singapore dollars, Wong said only 12 percent have direct exposure to US subprime mortgages.
"We are comfortable with our present position and as always will monitor our risks closely. Our total CDO exposures make up only one percent of our overall assets with over 70 percent of this amount concentrated in the high quality AAA/AA+ space," she said.
If for MT to LT, all banks counters, or in fact, majority of the BC are already on discount.
But still, nobody really dare to consolidate.
That's because everybody are afraid that they are caught in the "\" instead of "/", and they do not wish to lock their cash in.
Furthermore, there is this gossip of recession going around which affecting the sentiment and confidence.
Look at the trading volume for today and past few days and you will know.
I'm staying put until at least end of this wk bcos there are indexes and reports coming from US that may ripple to SGP.
Good luck to those who wish to buy their chances...
think if you are looking for mid to long term, its ok to go in...unless you are in for short term as in 3 to 5 days trade...why, 'cos I think the directors and temasek would pick up this stock if it hits too low...think there is some support level there...after all, its the 'jen hu' bank, you know...just my thoughts
Guess you will need another big US lender to report lost or suspend of fund before you can see DBS goes below 19 again.
Then again, when emotion comes in, how many really dare to pick it up at <$19 and when it really happen, not sure whether it will goes below $18?
totally agree with you...me also waiting patiently for this to drop below $19...heeheeee