Prudential - AIA - Great Eastern

Insurance is not a widely covered industry but we all know its big, very big. AIG was planning to hive off AIA (AIG's Asian operations) in a possible listing but Prudential surprised everyone by buying it outright, what a coup for them. Prudential bought AIA for a staggering sum of $35.5bn. It will fund it by raising $21bn via a rights issue. Prudential is already asking around the sovereign wealth funds of Malaysia, China and Singapore to take up smaller chunks of the enlarged entity - which I am sure many will. Later on, Prudential-AIA will be seeking a listing in HKSE, probably 4Q2010 or 1Q2011.



This will change the insurance industry landscape in Asia, in particular Singapore and Malaysia. Great Eastern used to have the area as their base and was building their reach across Asia, but now their home turfs are being attacked and their market share will be under threat across Asia.

Malaysia and Singapore are the core markets for Great Eastern, but Prudential-AIA will leapfrog over them in almost every metric - new premiums, assets, agents and products. The enlarged entity will have about 26% and 32% of the markets in Malaysia and Singapore respectively. It doesn't stop there, Prudential-AIA will now have market shares of 45% in Vietnam, 29% in China, 18% in Indonesia, 30% in the Philippines, 29% in Thailand, 24% in HK and 14% in India. What is spectacular with that platform is that each and every markets I have listed are strong growth markets for the insurance industry - which is why Prudential has pulled a great one, in particular if they can merge the operations and streamline everything without losing too many staff.

Great Eastern is a lot like old money, although its listed its free float is pathetic with OCBC holding 87% of the company. That shows how conservative they were. Remember one of the strong traits of an excellent CEO - "not standing still", you stayed put, you will get steamrolled sooner or later. Now Great Eastern will be on the backfoot trying to do "crisis management" and use defensive tactics. All that because for too long they have not been proactive enough, just sitting by and relying on pure organic growth - yeah, soon your company will be organic feed.

Why the need to hold 87%, come on??? There is a lot of deep value in Great Eastern as a stock. Many funds have shunned holding the stock because of the abysmal liquidity. They are now shocked out of their deep slumber, which should be a great time to buy the stock. Great Eastern trades at around S$14.20, just 1.2x the embedded value of S$12.22. Take AXA Pacific, it trades at 1.7x, and Prudential bought AIA for 1.69x. Conservative long term investors looking for great values to be unlocked should start buying and holding Great Eastern NOW!!! Nothing much will happen to the stock unless it has catalysts - and catalysts are being forced upon Great Eastern to act, its a once in a lifetime thing when you talk about these kind of stocks.

Embedded value is the present value of a company's insurance policies plus NAV, in case you were wondering. Great Eastern Holdings's recent share price is S$14.26. But buyers need to be in for the long haul because their shares traded per day ranges from 10,000 to 50,000 only.

Heck, the China insurance firms such as Ping An and China Life at trading nearly 3x their embedded value - let's face it, Great Eastern is on par or better run than all the firms I have just mentioned. Strong comfort level to get in now.

Great Eastern Holdings provides various insurance products and services through its subsidiaries Great Eastern Life Assurance and Overseas Assurance Corporation (OAC). The company offers life insurance, long-term health and accident insurance, annuity business written, and unit-linked insurance; and cover for risks associated with property and casualty related business.The company primarily operates in Singapore, Malaysia, China, Indonesia and Brunei. It is headquartered in Singapore City, Singapore.

The company recorded net profits of S$272.4m (eps 0.58) for year ended December 2008, and is likely to post a net profit of S$440m (eps 0.94) for year ended Dec 2009. Expect Great Eastern to start a more active mandate on M&A and joint ventures in the near future to protect their turf.

The company has 24 branches in Malaysia along with branches in Brunei, Indonesia, Hanoi, Shanghai, Ho Chi Minh City and Beijing. The company has tied agency force of 2,500 life planners in Singapore and 17,000 tied agents in Malaysia. OAC is the composite insurer in Singapore handling both life and general insurance. OAC distributes a wide range of commercial and personalized general insurance products through brokers, agents, bancassurance and direct channels.The company's bancassurance business is conducted through, and underwritten by, OAC.

The company also has subsidiaries operating in various areas of the financial service sector. Alpha Financial Advisers (Alpha) offers financial advisory services under a financial adviser’s license from the Monetary Authority of Singapore. With the existing distribution channels, tied agency and bancassurance, Alpha provides financial advisory services. The financial solutions are delivered by using proprietary financial advisory process and financial planning software system for the multiproduct- multi-manufacturer framework.

Lion Global Investors is one of the largest asset management companies in Southeast Asia. It is 70% owned by Great Eastern and 30% by OCBC Bank. Lion Global Investors offers a suite of investment products covering all asset classes to statutory boards, educational institutions, public and private companies, charities, non-profit organizations and retail investors.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

p/s photos: Liyana Jasmay

Stock Take On Highlighted Counters & Returns

Green Packet magnified the returns from 30% to 50%. Out of the stock for now.

DRB-Hicom, had a bit of run, then petered out. Corporate exercise seems not to be panning out, cut.

IJM Land, in at 1.81, supposed to wait for the 30% before, now 2.62... 44% take half profit, let the rest ride... but have a stop-loss(gain) at 2.50.

CIMB, in at 10.30, now at 12.44... 20%, will hold for the 30%.

QL Resources, in at 3.34, now at 3.46... wait for bonus.

Sep 7: Kurnia Asia 0.58, went to 0.76 (+31%), now at 0.70, took half profit, let the rest ride, stop-loss (gain) at 0.64.

Sep 16: TAS Offshore: in 0.78, had a run to 0.89, back to 0.80, still ok.

Sep 17: Ann Joo, in 2.30, now at 2.70, +17%, will wait for 3.00.

Sep 24: NSTP: in 2.08, went to 2.51, news out, play is over, today massive correction, good to buy and convert to MP and get the free warrants if can get NSTP below 2.15.

Sep 28: Hock Seng Lee, in 1.02, went to 1.20, now at 1.15, can wait till Budget news out then sell.

Sep 29: TAE, in 1.45, hold for TA Global exercise.

Oct 5: Sunrise in 2.09, went to 2.65 (+26%), now at 2.43. Didn't quite get 30% but enough, out for now.

Oct 7: Evergreen, in 1.01, now 1.07, some ways to go.

Oct 8: CSC Steel, in 1.08, now 1.23 (+13.8%), strong accumulation by institutional funds, will keep.

Oct 9: BRDB, in 1.72, now 1.90, small position, will wait till volume breaks out.

Oct 12: Fajar, recent posting.
Oct 14: Weida, recent posting.
Oct 16: Efficient e-Solutions, recent posting.

The above were views on stocks and sectors that I like, not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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Thursday, September 03, 2009

Looking Back On Returns

For the first quarter of 2009 I don't think I recommended to look at any one stock as I was not convinced of a rally or a substantive run. The good thing about blogging is that your views are all there to be examined, scrutinsed and criticised ... but it also allows you to reflect and note how your views evolve. Like a diary, the most notable postings started around April 24 this year (can go and check). Its fun to look at how things have turned out, bearing in mind that my assertion that stocks I like should have at least a 30% upside within 6 months, so far so good. If I can get a batting average of 65%, I am happy. There are not many runs in a year for a market like Malaysia, once its there, you have to seize the day and then exit when things are looking dowdy. Usually you can count on 2 runs a year lasting anywhere from 4 -15 weeks each time. Bull markets do not make us smarter, it makes picking winners easier.

Looking Back

April 24 - Confirmation of A Bull Run For Bursa
April 24 - Stocks & Sectors I Like As CI Breaches 1,000 (Property: SP Setia, UEM Land, even Talam, Sunway City, even MK Land. Financials: AMMB, EON Cap). ... safe to say that these property and financial picks outperformed the market substantially ... so far
April 27 - Talam Coming Out Of PN17 0.08 ... had a good run for a while even at 0.14 or 0.15 at some point I believe, still the run should come when its officially out of PN17
April 28 - MK Land Is Pretty Oversold 0.28 ... now at 0.40 but went as high as 0.47, we got our 30% or more
May 1 - Sell In May & Go Away " History repeats itself for a reason, because they do, people never learn and they keep repeating their actions and decisions time in time out. This is the same posting I did 4 years back in May 2006, and repeated this in May 2008, so for all intents and purposes, I should also repost this for May 2009. Personally, I don't think this May-August will be a down period."
May 5 - Stock Picks For A Nice Trade ... these were ok performers, not spectacular, its for a quick trade, if it works good, if not, get out...
SAAG long up to 0.29
Sapuracrest long up to 1.24
IOI Corp long up to 4.50
Kulim-WB long up to 3.32
Kulim long up to 6.00
May 7 - Go Long On The Brokers .. these were good runs, TA went to 1.27 (now 1.20), Affin went to 2.04 (now 1.88), ECM went to 0.78 (now 0.63), HDBS went to 1.75 (now 1.58), Kenanga went to 0.75 (now 0.65), OSK went to 1.58 (now 1.39)
TA long up to 1.03
TA-WB long up to 0.06
Affin long up to 1.77
Affin-WC up to 0.14
ECM long up to 0.66
HDBS long up to 1.45
Kenanga up to 0.68
OSK long up to 1.38
May 29 - Why I Like Pelikan 0.98 ... possibly the best call so far, now still at 1.52, we got our 30% here
June 4 - A Timely Look At B-Land & B-Toto 3.26 / 4.74 .. both did well, especially B-Land
June 11 - Tanjong, This One Can Buy & Hold 13.00 ... now at 15.82, up 21% so far, a bit more to go to get our 30%
June 11 - Whoops! There It Is (GenM) 2.90 ... now at 2.79, not good, I would cut now ..
June 23 - I Like Green Packet At Current Levels 0.70 ... very good entry levels at 0.70, now share price still at 0.705 but I get 1 right and 1 warrant basically FREE for every 2 shares, great return, easily way past 30%
July 13 - Market Commentary - "I don't like many stocks now as I think markets do look tired, but if you point a gun to my head to force me to buy one stock to hold till rest of they year, I would probably say E&O" 1.04 ...if anybody read this closely, they would have made a bundle, went ballistic today to a high of 1.52
July 17 - Why I Would Buy Astro Now 3.62 .. 3.43 now, news did not filter out as I had hoped, wishy washy developments, sell
July 24 - Why I Am Keen On MPHB Now 1.58 ... 2.11 now, we got 33%, enough
August 4 - Why I Like DRB Hicom 1.13 ... went towards 1.30 but fizzled out, still very keen on this, can hold on
August 12 - Why I Like IJM Land 1.81 ... went to 2.05, now at 1.98, will wait for my 30%
August 21 - Why I Like Bumi-Commerce Bank 10.30 ...recent call...
August 27 - Why I Like QL Resources 3.34 ...recent call ...

The above were views on stocks and sectors that I like, not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

p/s photos: Liyana Jasmay