Great Eastern Holdings - 2Q15 result: Slowing sales momentum

Great Eastern reported 2Q15 operating profit of S$139 mn, down 40% YoY (prior year boosted by tax reserve release), with NPAT up 70% YoY due to the one-off gain (S$120 mn after tax) of selling New China Life shares. We upgrade 2015E EPS by 7% accordingly.

New business sales premiums were S$204 mn in 2Q15, down 4% YoY. Singapore was down 9% mainly due to lower single premium sales (ahead of a 50-year anniversary push in 3Q15E), with Malaysia -1% due in part to the impact of recent GST changes.

Value of new business (VNB) decreased 13% YoY due to the lower new business sales and lower margin (40% versus 44% in 2Q14). Key drivers of lower VNB margins were lower MediShield sales in Singapore and tax assumption changes in Malaysia (last minute removal of medical claims credit under new GST system).

We maintain our OUTPERFORM rating with target price of S$31, implying 10x VNB multiple (AIA 16x). Current 2016E multiples are: 12x P/E, 1.1x EV, which we deem very attractive.

New business sales premiums were S$204 mn in 2Q15, down 4% YoY. Singapore was down 9% mainly due to lower single premium sales (ahead of a 50-year anniversary push in 3Q15E), with bancassurance sales flat due to more competitive environment in this channel, given changes of insurance partners at a major competitor.

Malaysia was down -1% due in part to the impact of recent GST changes, with sales of unit-linked products remaining robust.


Technical Analysis
Daily Chart
New business margins reduced to 40% (from 44% 2Q14) mainly due to 
(1) lower sales of higher-margin MediShield products in Singapore and 

(2) assumption changes in Malaysia due to the last minute removal of medical claims credit under the new GST system. (Read Report)

Source : Credit Suisse Asia Pacific Equity Research

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