AXA Asia Pacific (AXA) News Update

Submitted by Jim Thesiger on 11 June, 2008 - 14:06

AXA Asia Pacific (AXA) has a $6.50 share price target and an unchanged neutral rating from Australian Stockmarket analyst Macquarie Research Equities.

AXA Asia Pacific (AXA) Q108 HK life stats - still underperforming

Event: Q108 HK life stats released:

For the industry: (1) total NBI up 22% pcp, but sequential growth (-10%) impacted by markets (2) retirement FUM fell 5% sequentially on valuation and flows, now up 9% pcp (3) gross inflows into retirement products slid 13% sequentially, but likely to improve in Q2 given stabilisation in equity markets so far this quarter.

Impact: AXA APH still lagging system... gap steady:

For AXA APH, with all figures pro-forma for Winterthur deal: (1) total NBI growth of just 3% pcp is well below system, and in our view likely to remain so in Q208 unless there is significant operational improvement (2) NBI market share fell to 6½%, lowest on record, but nevertheless up a spot to #4 (3) retirement FUM growth better than system (-4% vs -5% sequential), partly due to more resilient inflows.

Action: Expect some improvement in medium term:

We remain concerned by AXA's HK underperformance, particularly given its larger size. This is likely partly driven by the Winterthur integration and adviser issues, which should ebb in coming quarters. Looking forward, the moderate stabilisation in markets in Q2 so far should assist industry NBI and FUM growth, though a return to historical growth rates is unlikely in the near term, in our view.

Valuation: $6.50 price target and Neutral rating unchanged

Our price target is SOTP based. Potential Opportunities: (1) strong capital position, (2) scale player in domestic financial planning, (3) improving ROE, (4) exposure to Asian growth. Potential Risks: (1) investment market leverage, (2) mid-scale domestic wealth mgmt business, (3) domestic NBI sluggish, (4) below-system Hong Kong growth.