Bank of East Asia (BEA)(00023) announced on Wednesday the conclusion of its strategic review that started in March this year. It will sell its life insurance business (BEA Life) along with a long-term exclusive distribution agreement leveraging its own banking network.
UBS Global Research said the scope of the asset disposal is narrower than previous media reports. It thinks a sale of insurance business has been well priced in but the final results may be disappointing to some expecting more material restructuring.
UBS thinks the optionality value on potentially more material restructuring has been the main factor underpinning the stock's outperformance versus peers year-to-date, but that angle has diminished with the conclusion of the review.
In light of uncertainties on asset quality and the review results falling short of expectation for some, UBS remains cautious on the stock. It maintained its "sell" rating on BEA, with a target price of HK$11.7.
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