DBS 01 (May 08 - Jul 10)

[winston]

When Std Chartered did their Rights issue, the price went up as it would assist in their balance sheet..

[winston]

Singapore's DBS CEO says rights issue not for M&A

SINGAPORE, Dec 22 (Reuters) - Singapore's DBS Group said on Monday its planned S$4 billion ($2.74 billion) rights offering was not in preparation for potential mergers and that the bank will focus on organic growth.

"Capital raising is not intended for any M&A activity or for provisions," CEO Richard Stanley said during a conference call.

DBS, Southeast Asia's biggest lender by assets, plans to offer shareholders one new share for every two existing shares held, it said in a statement earlier on Monday.

DBS last month reported a 38 percent fall in quarterly net profit to S$379 million and said it would cut 900 jobs or 6 percent of its staff.

DBS raised S$1.5 billion in May through a sale of preference shares that paid investors 5.75 percent per annum.

The rate was higher than the 5.05-5.1 percent offered by rivals United Overseas Bank and Oversea-Chinese Banking Corp, which also sold preference shares to strengthen their capital around the same time.

[financecaptain]

Rights issue priced at 45% discount. Lelong lelong ... Christmas sales come in early this year.

DBS Group Plans S$4 Billion Rights Offering at 45% Discount 2008-12-22 04:20:06.491 GMT
By Chia-Peck Wong and Cathy Chan

Dec. 22 (Bloomberg) -- DBS Group Holdings Ltd., Southeast Asia’s biggest bank, is seeking S$4 billion ($2.76 billion) in a rights offering to weather a credit crisis that’s forced it to cut jobs for the first time since 2001.

DBS will issue one new share for every two held by existing investors at S$5.42 apiece, according to a statement today. That’s a 45 percent discount to Dec. 19’s closing price of S$9.85. The bank’s shares were suspended from trading today in Singapore.

Chief Executive Officer Richard Stanley is turning to investors for cash after a slowdown in Singapore’s economy and rising provisions for losses on credit investments caused DBS’s steepest profit decline in two years. DBS joins financial firms that have raised about $920 billion worldwide to survive the
global recession brought about by frozen credit markets.

“The world is demanding banks have more capital and the outlook is very tough for Singapore banks right now,” Brian Hunsaker, a Hong Kong-based analyst at Fox-Pitt Kelton Asia Ltd., said before DBS’s announcement. DBS’s so-called core Tier 1m capital, a gauge of financial strength, is lower than at rival
Singapore banks, he said.

Edna Koh, a Singapore-based spokeswoman at DBS, declined to comment.

DBS rose 1.6 percent to close at S$9.85 on Dec. 19. The shares have slumped 52 percent this year, compared with a 48 percent drop in Singapore’s benchmark index.

Standard & Poor’s said Dec. 19 that it expects banks to face more uncertainty in funding markets and a higher level of stress than in a “typical business-cycle trough.”

Capital-Raising

Banks around the world are raising cash to combat the credit crunch. Standard Chartered Plc, the U.K. bank that makes most of its profit in Asia, said Dec. 18 it raised 1.8 billion pounds ($2.8 billion) in a rights offer.

In Asia, lenders including Mizuho Financial Group Inc. and National Australia Bank Ltd. have raised a combined $52 billions as the U.S. recession dragged down growth in the region, according to data compiled by Bloomberg.

Norinchukin Bank, the Japanese agricultural bank stung by wrong-way bets on credit derivatives, said Nov. 27 it will seek more than 1 trillion yen ($10.5 billion) in Asia’s biggest capital-raising since the global credit crisis began.

Shinhan Financial Group Co. last week agreed to inject 800 billion won ($620 million) into unit Shinhan Bank, South Korea’s third-biggest lender, to boost its capital as the nation edges closer to a recession.

DBS said Nov. 7 it will cut 900 jobs, or 6 percent of its workforce, in the bank’s first mass layoffs since 2001. DBS’s net income fell 38 percent to S$379 million for the quarter ended Sept. 30, the most among Singapore’s three banks.

Temasek Holdings Pte, one of Singapore’s two state-owned investment firms, controls 27.8 percent of DBS.

[millionairemind]

I guess behind the headlines.. Y is it priced at such a deep discount???

Madoff??? More subprime losses??? Bad debts rising?? Minibonds??

[winston]

Just curious why are the banks selling their rights issue at such huge discount. Std. Chartered ( Another Temasek linked company ) also were selling their rights at a huge discount...

Dont they know that their EPS would be affected ?

Or are they thinking of the Present only. Get the cash in first and then worry about EPS later. Isnt that a sign of desperation then ? Do they know something that you dont ?

[lrsun]

KE ever said $7.7/sh, dbs is attractive entry. Now, dbs comes with right issue, guess the entry px will be adjust even lower, could be $6.94/sh after Ex R.

[financecaptain]

Deperate time you need desperate measures. Or else you find no underwriters for the rights.

[lrsun]

Hi, All

My friend has 1000 shares of DBS in his SRS Acc, he likes to have this 500 shares or even more shares, how could he pay and receive this 500 shares? And what is the fee like? Can anyone here pls help.


tks

[la papillion]

Irsun, from my newbie's faq. Wait for the OIS which would be sent to you through mail first, it'll describe most of the things you'll see below:

~ Oops...forgot to see the SRS account. Hmm, I suppose the offer information statement OIS will mention it. I suggest you wait for it to be sent to you first.

20. How do I apply for rights? What are the options I have?

Okay, you received a bombshell in the form of rights issue and you don’t know what to do despite reading the thick OIS (offer information statement) mailed to you. You panicked.

If you flip the OIS and look for the section under “Procedures for acceptance, payment and excess applications by entitled depositors” under the Appendix section, you can see that it’s all spelt out clearly for all the possible cases you can imagine.

I’m only going to go through the basics. There are two main ways to subscribe for your rights:

a. acceptance and application by ATM of a participating bank

b. acceptance and application by CDP

First before choosing either options, look at the mailed Form A - white form (ARE for rights shares) or green form (WEWAF for rights warrants). Pay attention to the number of rights shares/warrants provisionally allocated – that is the amount that you are allocated, so you can choose to take it all up, partially, not at all and/or apply for excess. Find out how much you need to pay for and how much you need to pay if you want the excess rights.

If you go by ATM, it’s the easier option. Just go to the ATM screen, click on other transactions, then look for something like “ESA – IPO applications”, then find the company that is relevant. You’ll be guided to type in the amount of rights that you wish to accept out of the allocated (e.g you may be provisionally allocated 5000 rights but may want to accept only 2000), plus another separate screen where you’ll be guided to type how many excess rights you want to subscribe. Then you’ll come to a screen where they will tell you how much you have to pay. Make sure this screen you check carefully before pressing. I know for DBS you need to pay a service charge of $2.00, not so sure of other banks.

If you applied through ATM, then do not send any forms! It’s done – just wait for them to mail you how many excess rights you’ve successfully got and how much you applied for.

If you’re going through application by CDP, then you have to fill form A (the coloured forms). There’ll be instructions to tell you how to fill but I’ll run through a little. First, delete away the I/We* and my/our* that you see accordingly. Then look under Registration – and fill in quantity (the number of rights shares/warrants) you accepted, calculate and fill in the amount payable to CDP (multiply the quantity by issue price per share/warrant). Fill in the number of excess rights you wish to apply and repeat, total it up and sign below.

Next go to the bank to get a cashier’s order or banker’s draft (it’s just a cheque that is issued by the bank – you have to pay the bank a certain fee in addition to the amount for their services) with the following written – “CDP – XYZ RIGHTS ISSUE ACCOUNT” and crossed “NOT NEGOTIABLE, A/C PAYEE ONLY”. On the reverse side, write your name and your securities account number. Finally send the banker’s draft/cashier’s order and the form A to the enclosed envelope mailed to you. Affix your own stamp!

[la papillion]

Did this post for some friends who invested in DBS. Here's to share for everyone:

--------------------------------------------

DBS halt trading early this morning and rumors are flying about as to what is the actual reason for the trading halt. I thought that DBS will be settling the troubled bonds issue today, as the relevant authorities mentioned that an answer would be made at the end of this month. But that was not the reason for the trading halt. The real reason caught me a little by surprise.

DBS announced that it is going to raise capital to the tune of SGD 4 bil by issuing rights shares to existing shareholders. Rights exercise is basically an attempt to raise capital from exisiting shareholders by granting them an entitlement to buy additional shares at a discounted price. There are a few things that are important in a rights issue, and I take this chance to share with you what I know about it.


These are the few things you need to know:

1. Rights ratio

DBS are offering rights shares at a one-for-two ratio, which means that for every two pre-rights shares that you have before ex-rights (XR), you will be entitlted to apply for one more rights issue at the rights issue price of $5.42, a discount to the last close of $9.37 today. This means that for every 2 lots of DBS shares you own before XR, you'll need to pay $5,420 to get your entitlement of 1 lot of DBS rights shares.


2. Nil paid rights

The rights shares will commence trading as 'nil-paid' rights on 6th Jan 2009. As the name 'nil-paid' suggests, it means that you haven't paid for the rights yet. The rights will trade in the open market with its own quotation and symbol. Basically this system caters for 3 types of people:


a. Those who are already shareholders at XR and do not want to pay for the rights. The thing goes like this, whether you want it or not, you'll be given the nil paid rights. If you want to subscribe to it, you can do so by accepting it and paying for it before 20th Jan 2009 (last date for acceptance). You can even subscribe to excess rights beyond what is entitled to you too, but it might not be successful. For those who do not want the nil-paid rights (i.e. do not want to accept the rights shares and pay for it), you can sell it in the open market. The last date of trading for the nil paid rights is 14th Jan, 2009. Which brings us to the next category...


b. For those shareholders who want to make sure they can get excess rights shares without bidding for it (and thus subjecting to chance), they can also buy the nil paid rights direct from the open market. Of course, if you subscribe to excess rights and bid for a chance to get it, you'll only pay $5.42 for each right. But if you buy from the open market, you have to pay the market price of the right PLUS a fixed $5.42. Might not be so cheap.

c. Those who are not DBS shareholders at XR but want to buy the nil paid rights at open market. Basically these arbitrageurs will look for opportunities to buy the rights cheaply, waiting for the nil-paid rights to become ordinary shares on 2nd Feb 2009, then profit (or lose) the difference.

However, do not be mistaken that the nil paid rights will be trading at the rights issue price of $5.42. If we take the post-rights price of DBS to be $8.37 (as mentioned in the announcement), then the nil paid rights should be trading at around $2.95 range (8.37 - 5.42 = 2.95). DO NOT assume that it's cheap - it might not be!

For example, if we buy the nil paid rights off the market at $2.90 per share (this varies according to market forces), then pay another $5.42 per share (this is fixed) to convert it to ordinary shares, our cost of each new share of DBS will be $8.32. There's no brokerage involved so that is truly our cost. If after the new shares commence trading on 2nd Feb 2009 at a price of $8.37, we basically earn $0.05 per share (8.37 - 8.32 = 0.05) excluding brokerage involved in selling. To succeed in this arbritrage opportunity, we have to guesstimate the price of DBS on 2nd Feb, then minus off 5.42. Any price lower than that is a good bargain, pre brokerage charge.


3. The theoretical post-rights price of DBS on 2nd Feb 2009

If you've been in the market for long, you'll realise that 'by right', the price can be this and that, but 'by left', all is not right. Oh well, in theory, because DBS is offering 1 new shares for every 2 existing shares, they are going to dilute their earnings and dividends by a factor of 2/3, which is quite substantial for those who are shareholders but chose not to subscribe for the rights. This means that if the earnings is say $3 per share pre-rights, the new earnings will be $2 per share post-rights. Dividends yield too, if their dividend yield per annum is say 6%, the new dividend yield will be 4%. Ouch.

Anyway, here's how to calculate the new share price of DBS when the rights shares commence trading on 2nd Feb. Today, DBS closed at $9.37, so let's use this price. The formula is:

New share price of DBS = (2 x 9.37 + 5.42) / 3

If we take DBS's closing price to be 9.85, then using the calculation, we end up with the post rights share price of DBS at 8.37 per share. However, do take note that the actual price will be swayed by more than just mathematical calculations, hence it might not be what is calculated. Be aware of the risk of arbitraging!


There's a whole lot more details that I missed out, so for those who wished to find out more, do visit my newbie's FAQ (http://pub11.bravenet.com/faq/show.php? ... 1976&cpv=2). Alternatively, you can visit the same version in this blog (http://bullythebear.blogspot.com/2007/1 ... s-faq.html) over here.