Allianz Malaysia Bhd
(Feb 19, RM15.34)
Upgrade to buy with a higher target price of RM18.20: With Allianz Malaysia Bhd’s share price having fallen 13% since we downgraded it to “hold” on Jan 6, now is an opportune time to pick up the stock again, in our view. We revise up our financial year ended Dec 31, 2019 (FY19), FY20 and FY21 earnings estimates by 3%/10%/6% on expected higher investment gain.
We expect 4QFY19 to be another good quarter for the group, riding on ongoing unrealised investment gain as bond yields dropped further quarter-on-quarter in 4QFY19, the absence of several large fire claims in 3QFY19 and the release of some excess reserving.
We expect the group’s top-line growth to be decent in FY20 with Allianz General benefitting from increased sales through Pos Malaysia and Allianz Life sustaining its double-digit annualised new premium growth. FY20 bottom-line growth, however, will depend on whether the group can make up for the hefty unrealised investment gain that it is expected to report for FY19. Given the downtrend in Malaysian Government Securities’ yields, we expect such gains to persist at least into 1QFY20.
The raising of our sum-of-the-parts valuation to RM18.20 takes into account a higher estimated end-December 2019 embedded value of RM2.4 billion for Allianz Life (versus RM2.3 billion previously) and a higher end-June 2019 book value of RM2.16 billion for Allianz General versus RM1.98 billion at end-December 2018. — Maybank IB Research, Feb 16