HSBC - good value?

Just came back from a tiring but fulfilling 2 day event - helping a good friend to organise his wedding. I was aware that indymac had fallen and had been rescued. Fannie Mae and Freddie Mac are also in big trouble over the subprime issues. Today, when I finally stared at my watchlist (my companies didn't fall much), I was surprised to see HK falling over 3-4%. Now that is drastic!

Was thinking of whether to add in more HSBC at the current price of 113+-.

Here's what I gathered so far:



* EPS, dividends and NAV are given in USD



* Earnings in reports are given in USD. I used the conversion rate as advised in the hsbc official website (the dividend section) to convert earnings from USD to HKD. Closing price is the adjusted close provided by yahoo! finance site.




At HKD 113 now, the valution for hsbc looks really good. PE (last year's earnings) of 8.9x, which is way below the usual PE of hsbc (around 12x). Dividend yield (last year's dividend) is around 6%++. Given a 12.6% CAGR of dividend for a time frame of 10 yrs, buying at this price will 'lock' the dividends at 6%+ and growing at a conservative 10% per year thereafter. I believe this dividend is backed by a stable 10 yrs track record of increasing dividend.

Based on 2007's dividend,

To get a dividend yield of 7%, the price to buy in is around HKD 100
To get a dividend yield of 8%, the price to buy is around HKD 85

Based on 2008's forecasted dividend of HKD 7.71 per share (assuming 10% increment from 07's dividend),

To get a dividend yield of 7%, the price to buy in is around HKD 110
To get a dividend yield of 8%, the price to buy is around HKD 95

Will do more in future post.