2 Things That Investors Should Know About Oversea-Chinese Banking Corp Limited Right Now

If you are a current or prospective investor of Oversea-Chinese Banking Corp Limited (SGX: O39) – one of the three big banks listed in Singapore – there are two important things that you should know about it at the moment:

  1. OCBC has been engaged in share buybacks recently. In fact, the bank is one of the top five companies in Singapore’s market when it comes to the amount of money spent on share buybacks in June; the bank had bought back a total of 3 million shares during the month on multiple occasions. OCBC continued with its buybacks in July.
  2. OCBC’s current share price of S$8.74 represents a decline of 15% over the last 12 months.

Why are the two things important for investors?

First, a company may buy back shares when its management perceives that its shares are undervalued. It is worth stressing that the appearance of share buybacks alone does not mean that the company is indeed undervalued. But, it could still be taken as a prompt for investors to start digging deeper.

Second, after falling by 15% over the past year, OCBC’s shares now carry a price-to-book (PB) ratio of 1.07. As the chart below shows, this valuation is near a 5-year low for the bank.

OCBC's price-to-book (PB) ratio since 7 July 2011
Source: S&P Global Market Intelligence.  

OCBC’s share buybacks and low valuation in relation to history makes the bank an interesting candidate for further research.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.