Results Update
Allianz announced its results for QE30/9/2010 in late November. Its net profit increased by 17% q-o-q or 50% y-o-y to RM34.7 million while its turnover dropped marginally by 1% q-o-q or 4% y-o-y to RM607 million. The lower turnover was attributable to lower gross earned premiums from the general insurance business. Nevertheless, Allianz reported a higher net profit due to improved underwriting results which is attributable to lower claim ratio & expenses ratio.
Table: Allianz's last 12 quarterly results
Chart 1: Allianz's 19 quarterly results
Other Comment
In 4Q2009, Allianz transferred a surplus of RM12.0 million from its Life Fund to the Shareholder's Fund. I expect a similar transfer for 4Q2010 ending 31/12/2010. If this happened, Allianz's full-year EPS for FY2010 could be about 96 sen.
Valuation (amended)
Based on the above earning expectation, Allianz (closed at RM4.24 on December 6) is now trading at a gross PE of 4.4 times. However, Allianz has 192.337 million Allianz-PA which can be converted to ordinary shares on a 1-to-1 basis starting June 2011. Assuming all of them were converted to ordinary shares, Allianz's EPS would be diluted from 96 sen to 43 sen. Allianz's diluted PE would be 10 times. At this multiple, the stock is deemed attractive.
Note: Hat tip to reader Polite Market for bringing this to my attention.
Technical Outlook
From the chart below, we can see that Allianz tried to break to the upside of its symmetrical triangle at RM4.30. It made an intra-day high of RM4.36 before retracing to the overnight close at RM4.24 as at 11.05am. The indicators are slowly curving up- indicating an potential upside breakout.
Chart 2: Allianz's weekly chart as at Dec 8, 2010_9.10am (Source: Quickcharts)
Conclusion
Based on good financial performance & attractive valuation, Allianz continued to be a good stock for long-term investment. It could even be a good trading BUY if it can break above the RM4.30 level.
11 comments:
Hi
Careplus is a stock to choose?
Hi Cheer,
Careplus does not excite me. It is a smallish rubber glove maker which is now trying to expand in an environment where the demand growth has normalized or slowed while supply is being ramped up aggressively. If you must get into any rubber glove, go for the big one (such as Topglov or Harta or Kossan or Supermx).
Hovid is a PN17 co by virtue of its exposure to carotec n is reducing its stake significantly as a way to exit PN 17. Do you see any chance for this stock to recover agressively in near term or still to wait for a longer period. Your comment is greatly sought. Thanks
Hi ayseng
I am not sure about Hovid. I have studied this stock 1 or 2 months back when it was classified as PN17 due to the problem in Carotec. As you may know, Hovid is a decent company which is dragged down by its associate/subsidiary Carotec. To help Carotec to secure a bank loan, Hovid has executed an understanding to remain as a holding company of Carotec (similar to a Letter of Comfort). Strangely, it has been disposing off its shares in Carotec lately & it is no longer the holding company of Carotec. The question is whether the bank has consented to the sale-down. What is Hovid's liability now?
Hovid is now trading at RM0.17 or at a Price to Book of 1.3 times. Assuming all liabilities are accounted for, Hovid- after a clean break from Carotec- may report an earning of RM16 million a year or an EPS of 2 sen. This means that Hovid is now trading at a PE of about 8.5 times. For a smallcap, that's a reasonable valuation.
For all the uncertainties, the upside for Hovid may not be very exciting. You may be better rewarded by investing somewhere else.
Hi Alex,
Do you think Allianz is a better investment compared to MNRB? Thanks!
Hi Alex,
When you do Allianz earnings per share and PE ratio, did you add in the Allianz-PA shares, so that the earnings will be diluted? I think not yet.
If you have not add in the shares, then Allianz may not be so cheap.
Thanks for sharing
Hi Polite Market
Thanks for highlighting the impact of the conversion of Allianz-PA to ordinary shares. I have totally forgotten about that. The post has been amended accordingly.
Hi AlexP
Based on the adjusted PE (adjusted for dilution), Allianz's PE of 10 times is less favorable than MNRB's PE of 6.3 times.
However, MNRB's earning has been swinging like a seesaw for the past few quarters that investors would tend to be lukewarm about putting money in MNRB. It would likely to trade at a discount (say, 20%) to a composite insurer, such as Allianz.
Is is better to purchase Allianz-PA rather than Ordinary stock? What's the difference between these two from investment viewpoint? Thanks.
Hi Alex,
I'm holding Allianz ($4.25) & Icap ($2.06). What's ur view on these 2 stocks? Thank you.
Hi Alex,
Allianz being a cash cow is paying out very little dividend. Also, I don't see it aggressively increasing it's ROE. How do you view this kind of company?
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