07/02/2011

AGEAS..AVIS DE ING (je suis d'accord :-) )

AGEAS (BUY, €2.8): Balance sheet strength underestimated

For further information contact analyst: Albert Ploegh, Amsterdam (31) 20 563 8748

·       Ageas was the sector proxy for sovereign risk in 2010, resulting in sharp underperformance. In our view this is misplaced as: (1) exposures are significantly reduced; and (2) the strong balance sheet can withstand significant sovereign debt stress before requiring fresh equity. In addition, earnings capacity seems underestimated as long-term growth is secured by the attractive Asian franchise. Despite the strong YTD performance we believe the share remains an excellent play if sovereign fears ease further. We lower our target price in our base-case scenario to €2.8. Bull-case fair value seen at €3.7.

·       A comfortable excess capital buffer of at least €2.0bn allows Ageas to cope with a potential deepening of the sovereign crisis. Given the large buffers we see low probability of a need for fresh equity, even in a stressful scenario. Thus, we believe the market underestimates the strength of the balance sheet.

·       Earnings forecasts upped for 2011-12. We lower our 2010F net loss forecast €1.255m to €1.574m, fully reflecting fair value changes from legacy assets (BNP call options, Relative Performance note etc). We have not made any changes to our 2010 forecasts for the operating entities. We increase our forecasts for 2011F and 2012F, reflecting higher expectations for the international operations after revisiting the earnings expectations from recent transactions, the improving environment in UK motor insurance and reduced loss expectations from General Account. Our new reported 2010-12F EPS forecasts are -€0.62 (compared with -€0.50 previously), €0.21 (€0.18) and €0.23 (€0.22), respectively.

·       BUY rating reiterated. Target price lowered from €3.1 to €2.8. In 2010 Ageas was one of the worst performing Benelux and insurance stocks. Ageas was seen as the sector proxy for sovereign risk. Despite a halving of its exposure towards the end of 1H10, the underperformance did not come to an end, explained by concerns over the debt situation in Belgium triggered by the political deadlock. Our central view is that Belgium remains in the core of Europe, and is not moving towards the periphery. Despite the YTD share price outperformance of 15% versus peers, we believe the re-rating is not yet over. We continue to believe that Ageas is one of the most undervalued insurance names. We agree that: (1) sovereign woes continue to be a risk; and (2) legacy issues make it a complex equity story. Nevertheless, we believe the capital buffer is strong enough to withstand severe shocks. In addition, we argue that the current share price attributes zero value to the General Account (€1.6 per share in our bull-case scenario) and believe the Asian franchise remains overlooked.

09:42 Écrit par swingteam-cc | Lien permanent | Commentaires (0) |  Facebook |

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