NTUC Income shares

[Jacmar]

Minority investors (who were not accredited investors) finally have a chance to exit now

Income Insurance receives Pre-Conditional Voluntary Cash General Offer from Allianz Europe B.V.

NTUC Enterprise currently holds approximately 72.8% of the Shares in Income Insurance, with the remaining held by minority shareholders. As stated in the Pre-Conditional Offer Announcement, NTUC Enterprise and the Offeror have entered into a deed of irrevocable undertaking (the “Irrevocable Undertaking”) under which, among other things, subject to the fulfilment of the Pre-Condition and a Voluntary Cash General Offer (“Offer”) being formally made by the Offeror, in the event that the acceptances by the shareholders of Income Insurance immediately prior to the close of the Offer (excluding NTUC Enterprise’s acceptance of the Offer pursuant to the Irrevocable Undertaking) is less than 54,667,790 Shares, to duly accept the Offer in respect of such number of Shares which would result in the Offeror acquiring at least 51% of the Shares at the closing date of the Offer.

https://links.sgx.com/FileOpen/4.%20NTUC...eID=810055

Is S$40.58 per share offer fair?

If I am the IFA I would say not fair but reasonable considering it's an unlisted entity.
Not fair bcos OCBC/GE deal was done at 1.54 p/bv but here it's done only at 1.37 times. why the discount? OPMI can go to the EGM to stir some noise on this issue. In any case it's a done deal since NTUC Enterprise has agreed to sell their shares to let Allianz have 51%. I think the timing of this is not great as interest rate is coming down and their bond holding valuations should go up thus increasing the BV.

I will be accepting the offer....9 mths wait and without the 2024 div(sigh). Personally I never like to hold unlisted entity given my age. It's a rewarding exit after holding it for decades and getting 6% div along the way. 

Kudos to the Chairman/CEO for working themselves out of a job?

[xierwang]

Minority investors (who were not accredited investors) finally have a chance to exit now

Income Insurance receives Pre-Conditional Voluntary Cash General Offer from Allianz Europe B.V.

NTUC Enterprise currently holds approximately 72.8% of the Shares in Income Insurance, with the remaining held by minority shareholders. As stated in the Pre-Conditional Offer Announcement, NTUC Enterprise and the Offeror have entered into a deed of irrevocable undertaking (the “Irrevocable Undertaking”) under which, among other things, subject to the fulfilment of the Pre-Condition and a Voluntary Cash General Offer (“Offer”) being formally made by the Offeror, in the event that the acceptances by the shareholders of Income Insurance immediately prior to the close of the Offer (excluding NTUC Enterprise’s acceptance of the Offer pursuant to the Irrevocable Undertaking) is less than 54,667,790 Shares, to duly accept the Offer in respect of such number of Shares which would result in the Offeror acquiring at least 51% of the Shares at the closing date of the Offer.

https://links.sgx.com/FileOpen/4.%20NTUC...eID=810055

Is S$40.58 per share offer fair?

If I am the IFA I would say not fair but reasonable considering it's an unlisted entity.
Not fair bcos OCBC/GE deal was done at 1.54 p/bv but here it's done only at 1.37 times. why the discount? OPMI can go to the EGM to stir some noise on this issue. In any case it's a done deal since NTUC Enterprise has agreed to sell their shares to let Allianz have 51%. I think the timing of this is not great as interest rate is coming down and their bond holding valuations should go up thus increasing the BV.

I will be accepting the offer....9 mths wait and without the 2024 div(sigh). Personally I never like to hold unlisted entity given my age. It's a rewarding exit after holding it for decades and getting 6% div along the way. 

Kudos to the Chairman/CEO for working themselves out of a job?

Thank you for your input.

Actually, this is not ideal valuation since the CO was hit hard during past years thus BV affected badly, I think BV should recover soon, very likely I won't accept the offer and keep my shares with the new owner.

It's a rewarding Invesment for me as the shares are free for most of us after holding it for decades and getting 6% div and bonus shares along the way.

[weijian]

Is S$40.58 per share offer fair?

If I am the IFA I would say not fair but reasonable considering it's an unlisted entity.
Not fair bcos OCBC/GE deal was done at 1.54 p/bv but here it's done only at 1.37 times. why the discount? OPMI can go to the EGM to stir some noise on this issue. In any case it's a done deal since NTUC Enterprise has agreed to sell their shares to let Allianz have 51%. I think the timing of this is not great as interest rate is coming down and their bond holding valuations should go up thus increasing the BV.

I will be accepting the offer....9 mths wait and without the 2024 div(sigh). Personally I never like to hold unlisted entity given my age. It's a rewarding exit after holding it for decades and getting 6% div along the way. 

Kudos to the Chairman/CEO for working themselves out of a job?

Hi Jacmar,

Comparing GEH's BV to Income's BV For a start, I think it is not really very comparable. Mainly due to 3 reasons:

(1) GEH has a 70% owned subsidiary Lion Global Investors, an AUM manager with 70billion AUM. It is listed at cost on the balance sheet and not even consolidated at Group level. If we were to take a 3% of AUM as valuation of Lion Global Investors, that would add ~2bil to the NAV.

(2) In terms of net premiums (and equity value), GEH is 3x bigger than Income. Generally for money managers, the bigger you are, the smaller your cost base.

(3) GEH has franchises in other countries but Income seems to be limited to Spore. For example, GEH donated 785mil sgd to a Malaysian B40 fund in FY20 to allow its Msian franchise to keep its 100% stake. This 785mil was expensed and not capitalized. This is the barrier to operate in Msia and so GEH's Msian franchise has some "intangible value" not reflected on BS as well.


So how can we think of Allianz's offer? Since Income is not listed, I do not think an IFA will be appointed. However, since we have a recent case of OCBC's offer for GEH and an IFA was appointed, maybe we could leverage the IFA's ideas.

From GEH's IFA letter, the IFA (E&Y) believes that a fair value for GEH lies between 0.8-1x EV (embedded value). Income's EV is not available from its AR and Mgt also decline to disclose it from AGM minutes. However, I managed to google a copy of Phillip Capital's valuation report that has a private valuation of Income's EV.

The disclaimer here is that it is not calculated based on 2022 numbers but we could argue 2022's EV should be higher than the current, as bond yields (and the yield curve) were more friendly to insurers back in 2022.

Income's embedded value = 2224/0.52 ~ 4.28bil
EV per share (share count taken from latest AR) = 4.28bil/107.2mil = 40sgd

Allianz's offer of 40.58sgd is not too fair from ~1x EV (of FY22 valuation). So do you think it would be "unfair"?

Phillip Capital valuation of Income (pg4 for EV):
https://www.poems.com.sg/downloads/Incom...202024.pdf

[Jacmar]

Is S$40.58 per share offer fair?

If I am the IFA I would say not fair but reasonable considering it's an unlisted entity.
Not fair bcos OCBC/GE deal was done at 1.54 p/bv but here it's done only at 1.37 times. why the discount? OPMI can go to the EGM to stir some noise on this issue. In any case it's a done deal since NTUC Enterprise has agreed to sell their shares to let Allianz have 51%. I think the timing of this is not great as interest rate is coming down and their bond holding valuations should go up thus increasing the BV.

I will be accepting the offer....9 mths wait and without the 2024 div(sigh). Personally I never like to hold unlisted entity given my age. It's a rewarding exit after holding it for decades and getting 6% div along the way. 

Kudos to the Chairman/CEO for working themselves out of a job?

Hi Jacmar,

Comparing GEH's BV to Income's BV For a start, I think it is not really very comparable. Mainly due to 3 reasons:

(1) GEH has a 70% owned subsidiary Lion Global Investors, an AUM manager with 70billion AUM. It is listed at cost on the balance sheet and not even consolidated at Group level. If we were to take a 3% of AUM as valuation of Lion Global Investors, that would add ~2bil to the NAV.

(2) In terms of net premiums (and equity value), GEH is 3x bigger than Income. Generally for money managers, the bigger you are, the smaller your cost base.

(3) GEH has franchises in other countries but Income seems to be limited to Spore. For example, GEH donated 785mil sgd to a Malaysian B40 fund in FY20 to allow its Msian franchise to keep its 100% stake. This 785mil was expensed and not capitalized. This is the barrier to operate in Msia and so GEH's Msian franchise has some "intangible value" not reflected on BS as well.


So how can we think of Allianz's offer? Since Income is not listed, I do not think an IFA will be appointed. However, since we have a recent case of OCBC's offer for GEH and an IFA was appointed, maybe we could leverage the IFA's ideas.

From GEH's IFA letter, the IFA (E&Y) believes that a fair value for GEH lies between 0.8-1x EV (embedded value). Income's EV is not available from its AR and Mgt also decline to disclose it from AGM minutes. However, I managed to google a copy of Phillip Capital's valuation report that has a private valuation of Income's EV.

The disclaimer here is that it is not calculated based on 2022 numbers but we could argue 2022's EV should be higher than the current, as bond yields (and the yield curve) were more friendly to insurers back in 2022.

Income's embedded value = 2224/0.52 ~ 4.28bil
EV per share (share count taken from latest AR) = 4.28bil/107.2mil = 40sgd

Allianz's offer of 40.58sgd is not too fair from ~1x EV (of FY22 valuation). So do you think it would be "unfair"?

Phillip Capital valuation of Income (pg4 for EV):
https://www.poems.com.sg/downloads/Incom...202024.pdf

Hi weijian, yes I do agree that size matters a lot. This is probably the reason to justify a discount.

My bone of contention is that Income has hit a BV of $40 before the rate cycle kicks in and affected their bond valuation/EV. Now the interest rate is slowly normalising, the EV should have been much higher.  

I would read the Poems report with a pinch of salt. Their fair value of $20 is so far off the mark...laughable. Do they really know the EV of Income? I doubt so.

In any case for what's worth, the former CEO TKL said he is accepting the offer.