Homepage
PR Newswire
This is from OSK/DMG Research on GE on 22 Jan 13 for your reference.
Scoop of the Day:
Over the last couple of months, the world’s largest insurers have been fighting for a slice of the insurance pie in Asia, triggering a flurry of M&A deals. Last October, Pacific Century Group bought over ING Groep NV’s insurance business in Hong Kong, Macau and Thai life insurance units for US$2.14bn. The deal was followed closely by AIA’s purchase of ING Malaysia’s life insurance operations for US$1.73bn, while Prudential Plc bought Thai Thanachart Life Assurance Co, the 10th largest life insurer in Thailand, for US$590m in cash. In the latest deal sealed last week, Canada’s Sun Life Financial and Khazanah Nasional bought the Malaysian joint-venture insurance business of Aviva-CIMB for US$596m at a pricey multiple of 2.9x book value. Global players are attracted to the allure of the Southeast Asia market, a region with high economic growth, a 600 million population base and relatively low levels of market penetration. Transaction multiples in the recent spate of M&A deals, at 1.9-4.7x book values, suggest the stark under-valuation of Great Eastern Holdings, which trades at 1.7x book value and below Embedded Value of $17.30/share. Great Eastern today holds market-leadership positions in Singapore and Malaysia, and also operates in high growth markets such as Indonesia and Vietnam. Price drivers include:
1) Dividend hike arising from the huge gain from the sale of F&N/APB shares;
2) Steady underwriting results underpinned by growth in regular
premium plans;
3) clearing of over-hang of selling by institutional funds;
4) a third privatization attempt by parent OCBC. We pegged our valuation at a multiple of 1.55x P/EV for its core insurance operations and add back estimated excess capital of $4.35, deriving a TP of $24.50. GEH’s FY12 results will be released on the 8th February.
We maintain our BUY recommendation. (Goh Han Peng)
Scoop of the Day:
Over the last couple of months, the world’s largest insurers have been fighting for a slice of the insurance pie in Asia, triggering a flurry of M&A deals. Last October, Pacific Century Group bought over ING Groep NV’s insurance business in Hong Kong, Macau and Thai life insurance units for US$2.14bn. The deal was followed closely by AIA’s purchase of ING Malaysia’s life insurance operations for US$1.73bn, while Prudential Plc bought Thai Thanachart Life Assurance Co, the 10th largest life insurer in Thailand, for US$590m in cash. In the latest deal sealed last week, Canada’s Sun Life Financial and Khazanah Nasional bought the Malaysian joint-venture insurance business of Aviva-CIMB for US$596m at a pricey multiple of 2.9x book value. Global players are attracted to the allure of the Southeast Asia market, a region with high economic growth, a 600 million population base and relatively low levels of market penetration. Transaction multiples in the recent spate of M&A deals, at 1.9-4.7x book values, suggest the stark under-valuation of Great Eastern Holdings, which trades at 1.7x book value and below Embedded Value of $17.30/share. Great Eastern today holds market-leadership positions in Singapore and Malaysia, and also operates in high growth markets such as Indonesia and Vietnam. Price drivers include:
1) Dividend hike arising from the huge gain from the sale of F&N/APB shares;
2) Steady underwriting results underpinned by growth in regular
premium plans;
3) clearing of over-hang of selling by institutional funds;
4) a third privatization attempt by parent OCBC. We pegged our valuation at a multiple of 1.55x P/EV for its core insurance operations and add back estimated excess capital of $4.35, deriving a TP of $24.50. GEH’s FY12 results will be released on the 8th February.
We maintain our BUY recommendation. (Goh Han Peng)