atans1

Posts Tagged ‘AIA’

Around Asean: recent financial news

In Indonesia, Malaysia on 14/10/2012 at 6:51 am

Shares in the London-listed Indonesian coal miner Bumi rise sharply for a second day after a proposal from Indonesia’s powerful Bakrie family to split from the firm. The dynastic Indonesian Bakrie family has proposed a split from Bumi that they helped to create with the British financier Nathaniel Rothschild. Wonder what the guy who bot at 11 thinks?

A.I.A. to pay US$1.7bn for ING’s Malaysia business. A.I.A. said the acquisition will catapult it to the No. 1 position in Malaysia’s lucrative life insurance market. For the Dutch insurer ING, it is the first major deal in its plan to divest its Asian assets.

The founders of Malaysia’s AirAsia, Tony Fernandes and Kamarudin Meranun, are set to launch three IPOs in 2013 worth more than US$500 million (S$614 million).

Tune Group, a financial services-to-discount hotel conglomerate owned by Fernandes and Kamarudin, is expected to launch US$65 million IPO of its insurance arm, Tune Insurance, not later than the first quarter of 2013, according to two sources with direct knowledge of the deal.

Meanwhile, AirAsia’s long-haul arm, AirAsia X, recently hired CIMB, Malayan Banking Bhd and Credit Suisse Group for a US$250 million IPO expected early next year.

The group is looking to list its Indonesia operations, Indonesia AirAsia, by the first quarter of next year in a deal that could raise up to US$200 million.

The listing plans also come at a time when Fernandes is stepping down as the chief executive officer of the Malaysian-listed airline to focus on regional growth through Indonesia. The group’s plan to buy up to 100 Airbus jets, potentially worth about US$9 billion, is designed to fuel the growth of what is becoming a cluster of related airlines under Fernandes, who placed a record order for Airbus jets last year.

With an operating fleet of more than 116 aircraft, AirAsia has ordered a total of 375 Airbus jets as part of dramatic expansion plans that include the acquisition of Indonesia’s Batavia Air.

DBS Group, South-east Asia’s largest lender, is selling more than half of its 20.3% stake in The Bank of Philippine Islands (BPI) to conglomerate Ayala Corp for 25.6 billion pesos (S$757.3 million). “With the divestment of a 10.4 per cent interest in BPI, DBS will hold an aggregate 9.9 per cent investment in the bank. DBS will continue to have representation on the BPI board.”.

DBS, which has been a strategic investor in BPI since 1999, would realise a gain of about S$450m against the carrying value of the investment.

Ayala is the biggest shareholder in BPI, the Philippines’ largest bank by market capitalisation.

DBS is selling the stake at a time when the Philippines stock market is among the best performing markets in South-east Asia. The Philippines main index has gained some 23% this year, with BPI 42%.

Nice little profit in a rising market. Can’t blame DBS for not trusting the bullishness that the Philippines has got its act together finally.  It’s cyclical, juz like another peace treaty signed with Muslim rebels in the South.

Japan intends to start lending Burma money aiming to help transform Burma into a production and investment hub to rival Vietnam.  “Japan’s big trading companies are at the forefront of the investment effort. Mitsubishi, Marubeni and Sumitomo have signed an agreement with the Myanmar government to develop the initial phase of Thilawa, a 2,400-hectare site close to the southern port of Yangon, which will feature housing, commercial space and an industrial park,” reports FT

18.6% of AIA for sale

In Insurance on 03/09/2012 at 7:08 am

American International Group becomes free after September 4 to sell a US$7.6 bn stake in former unit AIA. If AIG does decide to sell the entire18.6% , the deal would be Asia’s biggest-ever block offering ever.

AIG could decide not to sell anything or it could sell off a small chunk. But expectations are that it wants to sell everything and soon.

AIG spun off two-thirds of AIA in 2010, raising US$20.5bn in the world’s third-largest IPO ever at the time. AIG agreed not to sell its remaining stake until this yr. In March it sold some, raising US$6bn.

AIA’s shares are up 9.5% so far in 2012  (the Hong Kong financial services sub-index finance/market is up 4.7% in 201)  and are up by 35% since its IPO. It is seen as a proxy to Asia’s growing wealth and booming demand for insurance and other financial products.

But AIA is not expensive compared to its peers. It trades at 16.3 times its 12-month forward earnings, according to Thomson Reuters data, while Asia-Pacific insurers on average trade at forward price-to-earnings ratio of 15.3.

AIA shares have remained resilient despite the stock overhang issue and just a week before the March selldown, the stock came within striking distance of its all-time high. AIG sold the AIA shares at HK$27.15 in the March selldown and on Friday the stock traded flat at HK$26.55.

As usual the underwriters are expected to line up a large investor or strategic buyer to take up a big chunk of the deal. GIC or Temasek? Temask is a cornerstone investor, I think.

Why investors don’t like acquirers

In Uncategorized on 16/08/2010 at 6:35 am

The reason: most deals destroy value for acquirers. The evidence.

And think of DBS’s purchase of Dao Heng, and PosBank. And even Singtel’s purchase of Optus. A dirty secret that the public are not aware of is that value of Optus is less than what SingTel paid for it. http://atans1.wordpress.com/2010/01/15/singtel-lost-at-least-a2-billion-on-optus/

AIA/PRU Update at 700 hrs GMT

In Insurance on 01/06/2010 at 10:51 am

[Update: AIG tells Pru, "Bugger off on yr new price" ]

Reducing the price to 1.3 times its own estimate of AIA’s embedded value of $22bn (from 1.69 times) would be US$29bn, down from US$35.5bn*. Even at this new price there are UK investors unhappy with the deal.They say execution is difficult, or why risk it? But according to press reports, the Pru’s largest investor, Los Angeles-based Capital Group, indicated it will vote in favour of the deal if the price drops to US$31bn-US$32bn. Prudential declined to comment.

FT’s Lex reports Whispers among underwriters suggest AIG could sell just under half of AIA at 1.6 times its disclosed embedded value**, netting the group about $15bn.

*BTW GE Life is trading at 1.23X 2009 embedded value at its current price of $ 16.20.

**AIA’s 2009 EV is US$18.75bn but Pru has a higher number US$21.01 — 12% higher. No wonder shareholders are upset even though AIA is more traditionally more conservative than Pru. BTW at 1.6x GE is worth $21.

AIA takeover is nuts, PRU shareholders advised

In GIC, Insurance, Temasek on 26/05/2010 at 6:45 am

RiskMetrics, an international share proxy advisory service, issued a critical assessment of the AIA takeover bid, saying while a deal had “a sensible strategic rationale”, Prudential was paying a heavy price.

FT reported that RiskMetrics said Prudential was paying US$35.5bn for a company with US$1.6bn in post-tax operating profits.

“For this to work, profits have to grow substantially beyond the expected cost synergies. Our analysis indicates that Prudential needs very high growth rates at AIA to only meet a reasonable return on invested capital, something that seems a stretch when managing a difficult integration process.”

Let me know when our local media report this story.

BTW GIC’s interest in this stock shows that its analysis is different: it is willing to forgo jam today for  jam tomorrow (maybe).  Hmm must be MM’s 30-yr view at work. Wonder who is right.  Remember shortly after he last said this , Temasek sold its BOA stock, just before the market recovered. GIC held on to its UBS and Citi investments.

Is GE Life fairly valued?

In Uncategorized on 03/05/2010 at 4:40 am

Based on friday’s closing price of $15.66,  GE Life is trading at  1.18x 2009 ‘s  Embedded Value (the sum of net assets plus the current value of future profits from existing policies) of $13.167 a share. I have argued that based on what PRU is paying for AIA, GE Life’s value should be unlocked by OCBC http://atans1.wordpress.com/2010/04/26/ocbc-value-to-be-unlocked-ii/

According to FT’s Lex, when an insurer is sold at  EV, this means it is assumed it will write no more new business, nor make any gains on its investments.  That is why most recent deals in mature markets have been completed at about 1.2 times – a small premium for control, for cost synergies, and for growth potential. The 1.69 times that the UK insurer is proposing to pay seems bullish, given that AIA’s two biggest markets by gross written premiums are Hong Kong and Singapore, already overrun by agents.

Then there’s the question of what the new owner will be allowed by regulators to keep. Some of the licences AIA holds were acquired decades ago, under old rules on foreign ownership. Factor in forced disposals, likely to be at multiples below 1.69, and the effective price for the remnants could become even higher. Korea Life, another insurer talking up an Asian growth story, recently went public at one times embedded value. Japan’s Daiichi Mutual, ditto, went at 0.6 times.

So if FT is right, the Pru is overpaying for AIA, and by implication GE Life at $15.66, is priced about right at about 1.18x EV. And that I talked nonsense about how much it was worth to OCBC, if sold.  If Pru’s shareholders vote against the deal, I talked rubbish.


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