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Investing in – UOB (SGX: U11)

During a recent conversation over dinner, I began to notice how understanding a company aids in picking stocks for the long-term investing. In this new re-vamped series, will begin looking at my personal stock pics in my current portfolios will in-depth opinions on why I chose certain sectors to invest in. To read more about the previously featured companies, you may wish to click here.

Let us have a look at UOB, which is one of the 3 Singapore banks. Being one of the oldest around as well. The interesting thing about this bank is its long history and being an established player in Singapore and the region. While they were under the social media spotlight recently over a case of misadventure with sending their high net worth clients with a diamond credit card enclosed in a plaque, I would say the bank’s fundamentals remain relatively strong – from a personal point of view.

Business strategy

From the information presented on the UOB Group website, it is seen that the bank is looking towards multifactorial growth and value. As such, it is a good long-term hold given the drivers to the business strategy is in adding value and building network.

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Source: https://www.uobgroup.com/about/story/approach/our_business_and_corporate_strategies.html

Intrinsic value

The bank is presently trading at an about right price from the analysis provided via http://www.SimplyWall.st. At the same time, one thing to note is, banks are hardly overpriced if you keep them in the long term. Given that most of the time, banks will face challenges from around the industry. Especially when the market is bearish – bank shares tend to will slide, when the market is bullish the opposite would usually happen.

Growth potential

Currently, the share price of UOB pays out a yield of 3.38%, while there is potential for further growth in the region. With the impending interest rate hike, it is likely to benefit in the near to long-term from potential higher interest income from loans.

On the side note, UOB has one of the highest credit card penetration rate in Singapore as they offer multi-brands of credit cards from the commonest ones – VISA, MasterCard to the least common and exotic companies such as – UnionPay, JCB, Amex. As such, it makes them one of the preferred banks for credit card accessibility. While, at the same time, their recent move into building co-branded products with Singapore Airlines – KrisFlyer UOB Account and the introduction of the Stash Account aims to build up their cash-rich clients base. It may translate to more cash-flow for loans to generate income but that remains to be seen.

MR H Portfolio

I only own 2 shares of UOB through the Monthly Investment Plans.

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