AIA Group 1299

Re: AIA Group 1299

Postby winston » Mon Oct 31, 2016 10:05 am

vested

Impact of UnionPay rules more sentiment than fundamentals

Maintain BUY; accumulate on near-term weakness

Prudential (PRU LN; non-rated) dropped 2% last Friday due to media reports of UnionPay’s tighter rules on buying HK insurance (link).

While this news will likely pressure AIA’s near-term share price, we believe the fundamental impact will be manageable, given AIA’s low exposure to large-sized short-term savings policies.

Maintain BUY with TP unchanged, which implies 2.1x FY17E P/EV and 15.4x VNB

Impact on AIA remains manageable

We expect the stricter rules to have manageable impact on AIA’s mainland visitor business because:
1) single premiums sold to nonresidents contributed only <4% of AIA HK’s total new premiums (APE) in 2Q16, while regular premiums accounted for 64%;
2) the average size of regular-premium policies was only <USD10k with most policies <USD5k;
3) AIA has low exposure to <5Y savings policies; and
4) payments could still be made via bank transfers with a USD50k annual cap.

Prudential disclosed that 80% of its mainland customers already have HK bank accounts.


Source: Kim Eng

https://factsetpdf.maybank-ke.com/PDF/3 ... b04f4b.pdf?
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Re: AIA Group 1299

Postby winston » Mon Oct 31, 2016 11:53 am

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AIA shares fall after some HK insurance purchases barred


About half of sales by AIA's Hong Kong unit were generated from Chinese visitors, AIA Chief Executive Officer Mark Tucker said in July.


Source: Bloomberg

http://www.businesstimes.com.sg/stocks/ ... ses-barred
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Re: AIA Group 1299

Postby winston » Mon Oct 31, 2016 12:03 pm

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<Research Report>Deutsche Bank Cuts AIA Target to $59.8; Kept Buy

Deutsche Bank, in its report, said UnionPay International announced that it has issued new guidelines to restrict cross-border purchase of Hong Kong insurance policies. Transaction limit remains unchanged at US$5,000 per transaction without mentioning daily limit.

Types of insurance that can be paid by UnionPay cards are restricted to "accident, health and travel/consumption type policies", so long-term whole life and saving products may no longer be purchased using UnionPay. Tighter monitoring and requirement will be imposed on overseas insurance-related merchants.

Deutsche Bank said UnionPay is a popular payment method for mainlanders and the restriction on life insurance payment could have a meaningful impact on near-term sales of AIA (01299.HK).

The broker estimated mainlander sales accounted for 57% of AIA HK?s VONB in 1H16 or 22% of total VONB.

Assuming UnionPay accounted for about 50% of HK offshore sales, the broker estimated 11% of AIA?s VONB could be affected. Therefore, Deutsche Bank lowered its 2016/17/18 VONB forecasts by 3.2%/9.9%/9.7% respectively to 23.9% (4Q16: 12.9%)/11.9%/17.1% and HK VONB growth of 36.8%/2%/15%.

However, Deutsche Bank said driven by expectation of RMB depreciation, there are still demand for USD-denominated life policies sold in Hong Kong, and mainland customers could find other ways to pay for the policies.

In addition, AIA China could potentially benefit from higher sales as a portion of the life insurance demand may flow back to China. The broker kept rating at Buy with the target price lowered from $63.3 to $59.8.

Source: AAStocks Financial News
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Re: AIA Group 1299

Postby winston » Mon Oct 31, 2016 1:38 pm

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<Research Report>G Sachs: AIA Long-Term Fundamentals Unchanged; Reiterated CL Buy

Goldman Sachs, in its report, said on 29 October, UnionPay International announced guidelines reiterating their rules on overseas insurance purchases via UnionPay; first implemented in HK as a pilot.

UnionPay can only be used to purchase travel-related accident and illness policies; stricter implementation of US$5,000 cap on card transactions for purchase of insurance policies; life insurance with capital investment nature cannot be bought via UnionPay.

The bank said insurers are still trying to interpret the details though major uncertainties remain: applicable products and number of transactions per day.

The broker believed insurers like AIA (01299.HK) will follow a more conservative interpretation at this stage which may cause some disruption in their operations. However, the broker said its long-term fundamentals remain unchanged, thus kept the stock in CL-Buy.

In 1H16, Hong Kong accounted for about 40% of AIA's value of new business (VONB). Mainland visitors contributed 50% of AIA's HK VONB, and the broker estimated 50% of which was through UnionPay.

Assuming all products are banned and no recovery from other payment means, the direct exposure would be 10% of AIA Group VONB.

Source: AAStocks Financial News
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Re: AIA Group 1299

Postby winston » Mon Oct 31, 2016 1:40 pm

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<Research Report>Nomura Downgrades AIA (01299.HK) to Neutral with Target Cut to $54.46

Nomura, in its report, said as UnionPay tightened up mainlanders' purchase of life insurance in Hong Kong, the broker expected the offshore business risk of AIA (01299.HK) to rise, thus decided to downgrade its rating from Buy to Neutral, with DCF-based target price cut from $62.19 to $54.46.

Nomura said the business in Hong Kong is expected to be affected potentially, thus the broker reduced the FY16 VONB by 3% and FY17 VONB by 12%.

Nomura said Hong Kong's insurance business from mainland clients will shrink because UnionPay, the main payment channel used by mainland Chinese to purchase saving products, is now prohibited, and after the pricing reform, the pricing advantage of Hong Kong protection type insurance compared to mainland products has dropped from 30% to 10%.

Source: AAStocks Financial News
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Re: AIA Group 1299

Postby winston » Mon Oct 31, 2016 1:41 pm

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<Research Report>C Suisse Downgrades AIA(01299.HK) to Neutral with Target Cut to $54

Credit Suisse, in its report, said the use of UnionPay for buying insurance in Hong Kong and abroad is banned other than accidental, medical and travel consumption.

If rules are strictly enforced, main products of AIA (01299.HK), such as participating or other saving insurance, cannot be purchased via UnionPay.

Customers have to switch to other payment methods, such as Visa/Master, bank draft, or cash, which are expensive or inconvenient.

EV should be largely intact, given contribution from PRC visitors to in-force book is small, and UnionPay is less commonly used in paying renewals.

Due to uncertain outlook and limited upside, the broker trimmed the target price from $60.6 to $54 and downgraded AIA from Outperform to Neutral. AIA Group is still a CS Asia ex-Japan Focus List stock.

Source: AAStocks Financial News
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Re: AIA Group 1299

Postby winston » Mon Oct 31, 2016 2:00 pm

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<Research Report>JPM Regards AIA Share Price Decline as Buying Opportunity; Reiterated at Overweight

JPMorgan, in its report, said according to news reports during the weekend, UnionPay banned mainlanders from buying life insurance of investment nature in Hong Kong.

This should affect the share price of AIA (01299.HK) in a short term, as Hong Kong is the largest market for AIA Group's value of new business (1H16 HK VONB contribution: 39% of the group).

Also, the company's recent growth in Hong Kong was strongly supported by Mainland visitors. However, the VONB growth of the group has remained strong since Beijing limited investors in buying insurance with credit cards in February. Therefore, today's fall will imply a "buying opportunity".

Assuming that AIA HK's offshore product sales become zero, the group's VONB growth is expected to fall to -4%/13% from 10%/16% in 2017/2018.

However, in case of a plunge in the share price, it is expected that the company should buy back shares due to strong capital flow, so the broker reiterated the rating Overweight with target price of $65.

The broker will re-visit AIA's earnings model after the official related documents release and reviewing the company's sales trend.

Source: AAStocks Financial News
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Re: AIA Group 1299

Postby winston » Mon Oct 31, 2016 5:58 pm

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AIA shares dive after UnionPay clampdown on Hong Kong insurance

by NORIKO OKEMOTO

A Hong Kong newspaper reported that about a third of the insurer's operations in the city are aimed at mainland customers.


Source: Nikkei Asian Review

http://asia.nikkei.com/Markets/Equities ... -insurance
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Re: AIA Group 1299

Postby winston » Sat Nov 19, 2016 9:38 pm

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Best of times, worst of times; Initiate with Reduce

Initiate on AIA with a Reduce. We see FY17F to be the most challenging period for AIA's VONB growth since IPO, with lowest-of-consensus growth forecast of 9% yoy.

AIA is well established as a consensus Buy by sell-side analysts and an investor favourite for some time, in our view. Investor expectations may be set too high.

Results seasons accounted for almost half of AIA’s share price outperformance post-IPO. This may be tough to sustain in FY17F, given the difficult outlook.

Valuation now more geared to VONB growth than any other time since IPO.

Uncertainty could persist, as it is difficult to rule out further regulations targeting mainlanders buying insurance in HK.

Source: CIMB

https://brokingrfs.cimb.com/oDGiWvx0mRS ... SxF8Q2.pdf
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Re: AIA Group 1299

Postby winston » Fri Dec 09, 2016 9:02 am

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Paying the price of uncertainty

Discussions with investors indicate AIA’s recent price weakness could continue, despite AIA underperforming HSI by 6.7% since 16 Nov 2016.

Uncertain outlook on sustainable value of new business (VONB) streams in AIA’s biggest market (i.e. HK) is a key issue for a number of investors.

Investors see too much policy risk surrounding AIA’s outlook for 2017, with its outlook seen to be the most uncertain since its 2010 IPO.

Given our projected timeline of uncertainty, it may be only at the end of Apr 2017 that investors have more certainty about sustainable VONB streams.

We retain our Reduce rating, and GGM-based target price of HK$43.60

Source: CIMB

https://brokingrfs.cimb.com/K8ySEh_bMGc ... FSHwg2.pdf
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