IN FOCUS EFU General Insurance Limited: Improving core operation + healthy portfolio to unlock value We initiate coverage on EFU General Insurance Company (EFUG) with a TP of PKR171/sh offering a total return of 15% from last close. Our conviction on the scrip stems from i) improving prospects of the underwriting business in the wake of economic recovery and ii) diversified revenue streams as the company is likely to receive consistent income from its equity and debt market investments coupled with growing profit from associates. The company already demonstrated a massive growth of 2.2xYoY to PKR988.5mn in core business during 9MCY14 on account of lower claims of PKR2.3bn (down 15%Y0Y). Going forward, we account for a normalized growth of 26% over the next four years, a significant decline from the massive growth of 85% CAGR registered during CY08-CY13. Incorporating improved core business coupled with healthy contribution from investment portfolio, we expect the company to post earnings of PKR1.6bn (EPS: PKR10.3), with an ROE of 13%. Going forward, we expect the company’s average ROE to improve to 15.2% in next three years as against 10.9% in past three years. At current levels, EFUG trades at CY15F P/B and P/E multiple of 1.8x and 11.9x, respectively. Report by: Iqbal Dinani BMA Capital Management Ltd. (9221) 111 262 111 This report produced by BMA Capital Management Ltd. contains information from sources believed reliable; we do not guarantee that the matter is accurate or complete. Our Research Analysts compile this memorandum based on opinions and judgments, which may vary and be revised at any time without notice. This report is for information only and is not an offer to buy or sell, or solicitation of any offer to buy or sell the securities mentioned. It is published for the use of our clients may not be reproduced, distributed or published by any person for any purpose whatsoever. Action will be taken for unauthorized reproduction, distribution or publication. The views expressed in this document are those of the BMA Research Department and do not necessarily reflect those of BMA or its directors.
Posted on: Wed, 14 Jan 2015 07:21:06 +0000
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