UBS Global Research lowered its target price for AIA Group (01299) to HK$90 from HK$92 and maintained its "buy" rating.
The research house said AIA's 12-month forward P/EV has fallen 17%, to only 1.6x, since its year-to-date peak. UBS's scenario analysis suggests the negative impact of AIA Hong Kong's growth is well priced in, as its most bearish case still indicates 2020 RoEV of 14% versus the historical average of 13.4%.
Following its in-depth discussion on China with AIA's regional CEO, UBS noted that (1) AIA will likely begin a geographical expansion in China in 2020; UBS thinks 1-2 provinces a year is a realistic pace; (2) a city-based strategy should help AIA to replicate its premier agency model and protection-oriented product mix; (3) China's organic growth will likely be self-fundable; (4) deregulation of municipal bonds and AIA China's potential subsidiarisation could improve investment flexibility; and (5) AIA's strong brand and advisory service, supported by its high-quality agents, help it to avoid adverse price
competition.
18/10/2019 17:52
{I-bank focus}UBS lowers AIA Group (01299) to HK$90; "buy"
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