28-01-2013, 10:53 PM (This post was last modified: 28-01-2013, 10:54 PM by SLC81.)
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)
Er... valuation methodology appears to be in line with earlier postings - please refer back to postings #16 and #19.
Valuebuddies do have faithful audiences.
I think with OCBC Group controlling over 87% stake in GE Holdings, it will be their call to table a fresh privatisation deal.
Moreover with the asset inflation since 2006, OCBC must table an irresistable deal in order to ensure that a new exercise must not fail.
If they cannot table such a deal, it will be better off the remain status quo and keep the listing since they are already the largest holder and the opposition camp is simply hardcore.
Apart from keeping a different set of directors and maintaining the listing status - which they have been doing since 2006, there is really little hassle in keeping GE Holdings listed.
As for unlocking shareholders' wealth at GE, apart from getting rid of the stubborn minorities, OCBC has very little to gain since they already own more than 87%.
Other opinions will be deeply appreciated.
Vested
(28-01-2013, 10:53 PM)SLC81 Wrote: 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)
(28-01-2013, 11:36 PM)greengiraffe Wrote: As for unlocking shareholders' wealth at GE, apart from getting rid of the stubborn minorities, OCBC has very little to gain since they already own more than 87%.
Current shareholdings levels allows them to consolidate OCBC as a subsidiary and gives them the heft when it comes to balance sheet size. However with Great Eastern being a separate public listed company there may be some things that OCBC could not get when it comes to synergy / cost savings when managing that asset base of equitities / properties / bonds. Also there could be annoying issues with IPT when they try to get things done.
As it stands Great Eastern is cheap, but suffers from being an "prestigious public listed bus stop" that their senior management staff must go through before being promoted within OCBC (see changes in CEO over the past few years). This benign neglect will cost them in the long run. If this is a privately held OCBC subsidiary minority shareholders would have no say, but current listing status is a little ambiguous - after all minority shareholders can ask how is selection process of the CEO / management beneficial to Great Eastern, given that part of their ownership does not reside with OCBC group.
Health insurance cost to rise from March
2013-02-01 00:31:23.598 GMT
By Magdalen Ng
Feb. 1 (Straits Times) -- THE cost of health-care insurance
will spike sharply from March when premiums increase on the back
of enhancements to MediShield coverage.
Annual premiums for MediShield, the national health
insurance scheme, will increase by between $17 and $251 partly as
coverage is now being extended to 90 years of age.
A person aged 40 on his next birthday, for example, will
have to pay $105 a year, up from $54 previously, a 94 per cent
spike. Someone aged 85 on his next birthday will see an increase
of about 2.4 per cent from $1,123 to $1,150.
The Government is providing a one-off Medisave top-up of up
to $400, for all insured Singapore citizens.
MediShield is a basic plan that is aimed at providing
Singaporeans with coverage for large hospital bills at the Class
B2 and Class C levels.
There is also the option to increase the coverage with a
Medisave-approved integrated shield plan, which can include
private hospitals in their coverage. Integrated shield plan
premiums can be paid using Medisave.
The integrated shield plan providers are AIA, Aviva, Great
Eastern, NTUC Income and Prudential.
In line with the MediShield premium increases, private
insurers have also upped their annual premiums for shield plans.
The increases depend on the policy and age. The average increase
by each insurer is about 20 per cent to 50 per cent.
The insurers say the premium rises take into account the
increased coverage provided, which includes $100-a-day claims for
acute psychiatric hospital care for up to 35 days a year and
claims for short stays at medical emergency departments.
Coverage has also been extended to inpatient congenital and
neonatal treatment for newly diagnosed conditions.
In e-mail responses to The Straits Times, the five insurers
offering integrated shield plans cited rising medical costs and
the high incidence of claims as main reasons for their premium
increases.
Different insurers have also included unique enhancements to
their plans.
Great Eastern (GE), the leading insurer here, said the
average claim cost per insured member increased by 50 per cent
between 2008 and 2011.
NTUC Income's senior vice-president and general manager for
group and health, Mr Pui Phusangmook, noted that since the last
MediShield premium increase in 2008, the average payout per claim
has risen by 12 per cent per year.
"The revisions are necessary to sustain our IncomeShield
plans and meet the needs of policyholders over the long term," he
said.
"We have not made any changes to the premiums of most of our
main plans for over four years, and adjustments were overdue in
the face of rising medical costs and longer life expectancy."
He added that as Singapore's first provider of integrated
shield plans, NTUC Income customers tend to be subject to fewer,
if any, exclusions and therefore more likely to make claims.
Mr Daniel Lum, director of product and marketing at Aviva
Singapore said that integrated shield plans offered by the
various insurers vary not just in terms of premiums but also
benefits. "Rather than simply comparing premiums, consumers
should look at the benefits to ensure the plan they've selected
best suits their needs."
GE's chief product officer Lee Swee Kiang noted: "The public
should be mindful not to switch insurers or plans too easily as
they run the risk of not being covered by the new insurer should
they have an unknown pre-existing medical condition."
Customers will be informed of the changes by their insurers.
The full report by dmg was just published. There is nothing very new from the 22 Jan 13 publication. Nevertheless its a waking up call that GE is very undervalued.
Incidentally, GE has broke through the previous high convincingly.
Great Eastern Holdings
Poised for re-rating
A flurry of recent M&A deals in Southeast Asia’s insurance sector puts the spotlight
on GEH’s under-rated insurance franchise. Global players from Prudential to AIA
and Sun Life are swooping in on the region and entrenching their presence through
a series of bolt-on acquisitions. Transaction multiples, ranging from 1.9-4.7x of book
values, suggest GEH’s current valuation, at 1.7x P/Book and 1x P/EV, is inexpensive
and has scope for re-rating given its dominant position in Singapore and Malaysia
and a growing presence in Indonesia and Vietnam. Share price catalysts include: 1)
Higher dividends for FY12 with the $422m gain generated from the sale of APB/F&N
shares; 2) clearing of overhang from institutional selling and 3) a third privatisation
attempt by OCBC Group. We pegged our TP at $24.50 on a multiple of 1.55x P/EV for
its core insurance business and attribute $4.35/share for the excess capital within
the group. We maintain our BUY recommendation.
Spate of M&A deals put the spotlight on GEH’s undervaluation. In the latest deal
sealed a fortnight ago, 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 and 2.4x price/embedded value. This follows on the heels of
earlier deals, such as AIA’s purchase of ING Malaysia’s life insurance operations for
US$1.73bn, and Prudential’s purchase of Thai Thanachart Life for US$590m.The high
transaction multiples in these M&A deals reinforces our view that GEH is substantially
undervalued, trading at 1.7x P/BV and 1x P/EV.
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