On 4 December 2020, the Monetary Authority of Singapore announced four successful digital bank applicants.
The two winners of the full digital bank license were a consortium between Grab & Singtel and Sea Limited.
Two other companies won the Digital Wholesale Bank license – a consortium comprising Greenland Financial Holdings, Linklogis Hong Kong, and Beijing Co-operative Equity Investment Fund Management and the Ant Group.
Being a global financial hub, winning the licenses would be material to the future growth prospects of these companies. In this week’s edition of 4 Stocks This Week, we look at some listed companies that were vying for the digital bank licenses and how their stock prices have performed this year and since the announcement.
After what has been a disappointing year for Singtel (SGX: Z74) investors (Singtel stock price was at $3.40 on 2 January and was $2.00 on 2 November), winning the full digital bank license (with Grab) was a welcome piece of good news. Singtel shares jumped from $2.34 (4 December) to $2.41 (7 December) after the announcement. As of 11 December, share prices are at $2.31.
The move to secure the digital bank license with Grab is a clear indication that Singtel will be moving into the financial space. To be clear, the company had already started a few years ago with its mobile wallet – Singtel Dash. Now, it will also be providing full banking services, via the joint-venture entity, to people in Singapore.
Singtel will own 40% in this joint-venture entity, with Grab holding the other 60%.
iFAST (SGX: AIY) was leading a consortium to secure one of the Digital Wholesale Bank Licenses. However, it was not successful in its application.
In 2020, iFAST shares have performed exceptionally well, moving from $1.04 (2 January) to $3.90 as of 4 December, up about 3.75 times. The company was also queried by the Singapore Exchange (SGX) on 4 December after unusual positive price movements were observed during trading hours.
However, after the announcement of the digital bank results on 4 December (after trading hours), iFAST share price took a tumble on 7 December when the market opened and ended the trading day at $2.69. It’s now trading at $2.93. Based on its current share price, the company is trading at a price-to-earning ratio of about 47 times.
In a deviation from our usual 4 Stocks This Week article, we will touch briefly on another two non-SGX-listed companies.
Sea Limited (NYSE:SE)
A Singapore-based company, Sea Limited (NYSE: SE) is listed on the New York Stock Exchange (NYSE) and has a market capitalisation of about USD 95 billion, or about S$127 billion. This makes it by far the most valuable company in Singapore today, even more than DBS. Sea Limited is well known for two of its business – Shopee and Garena.
2020 has been a remarkable year for Sea Limited. The company’s share price has soared from USD 40.04 on 2 January to USD 193.38 as of 11 December, up almost 5 times.
Now that it has won the full digital bank license, expect the company to move in aggressively to build up its financial services operations in Singapore.
Razer (HKG: 1337) was one of the companies hoping to win one of the Full Digital Bank License. However, their efforts fell short.
Listed on the Hong Kong Exchange, Razer, like many other technology companies, has done well for its investors in 2020. Share prices have gone up from HKD 1.38 on 2 January to 2.68 as of 4 December. After the announcement of the digital bank results, it slipped to 2.34 as of 11 December.
One of the observations we have while looking through the companies that applied for the digital bank licenses is the global footprint of these companies. For example, while both Sea Limited and Razer have Singapore heritage within their company, they are recognised as global companies and are listed on overseas stock exchanges. Grab is also a strong regional player that is privately-owned. Only Singtel and iFAST (which did not win the license), were Singapore companies listed on the SGX.
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