Market: HOSE HRS June 24, BVH ––– Bao Viet Holdings Sector: Insurance Equity 2009 Research
Horizon Securities Company notes
Bao Viet Holdings (BVH): Founded in 1965, Bao Viet was Research team equitized on 31 May 2007. Bao Viet has captured the leading spot in the non-life insurance segment and is second only to Marc Djandji, CFA Prudential in the life insurance market. Head of Research [email protected] Investment Highlights +84.90.318.9687
• At the end of May 2007, BVH sold 59.44 million Phuong Le shares (of 573 million total shares outstanding) to Analyst the public through its equitizaiton at an average price [email protected] of VND73,910 (US$4.16).
• On June 25 th 2009, the BVH ticker will debut on HOSE with an initial reference price of VND38,500 (US$2.17) and will be allowed to trade within a +/- 20% trading band on the first day.
• At its initial reference price, BVH will debut at 37.6x FY09 PER and 2.6x FY09 P/B 1, which represents a 143% and 119% premium to its local peers in the insurance industry. Furthermore, ROE and ROA ratios underperformed industry averages over the past two years. The substantial premium to peers the company is listing at, in our view, is difficult to justify considering the profitability of the company and the increased competition in the market which will continue to erode margins in the future.
• Restricted shares reduce the free float to approximately 49.2 million shares. In October 2010 the free float will increase by 464.7 million shares due to the introduction shares held by the Ministry of Finance and Vinashin. In October 2012, the free float will increase by an additional 59 million share from HSBC Insurance.
• Management intends to pay VND800 per share as a dividend in 2009, equivalent to 2.1% dividend yield and VND1,000 per share in dividends for the following three years.
1 Please note that for comparison purposes we have re-adjusted BVH’s total revenue & net income in 2008 due to its first fiscal term’s result from October 16th 2007 to end of December 2008 (14.5 months).
Please refer to the important disclosures at the end of this document .
Horizon Securities 1 Company note ––– Bao Viet Holdings (HOSE: BVH)
Valuation
Figure 1. Quick valuation
Market Price (VND) 38,500 Market Cap (VNDmln) 22,061,524 2008E 2009E 2010E 2011E 2012E Chartered capital (VNDmln) 5,730,266 5,730,266 5,730,266 5,730,266 5,730,266 Share outstandings (shares) 573,026,605 573,026,605 573,026,605 573,026,605 573,026,605 Total revenue (VNDmln) 6,715,168 9,717,000 11,561,000 13,355,000 15,515,000 Net profit (VNDmln) 438,191 586,150 950,000 1,070,650 1,241,650 Dividend (VNDmln) N/A 458,421 573,027 573,027 573,027 EPS (VND) 765 1,023 1,658 1,868 2,167 P/E 50.3x 37.6x 23.2x 20.6x 17.8x Book Value (VND'mln) 8,301,511 8,429,240 8,806,213 9,303,837 9,972,460 Book Value per Share (VND) 14,487 14,710 15,368 16,236 17,403 P/B 2.7x 2.6x 2.5x 2.4x 2.2x Source: Bao Viet, HRS estimates Note: Revenue & Net income 2008 is annualized due to BVH’s first fiscal term’s results which ran from October 16th FY2007 to December 31st FY2008 (14.5 months)
Figure 2. Local comparison with peer
Ticker Companies Market Cap. P/E P/B ROE ROA (VNDmln) 2006A 2007A 2008A 2009E 2006A 2007A 2008A 2009E 2006A 2007A 2008A 2006A 2007A 2008A BMI Bao Minh 2,476,400 24.6x 18.7x 19.7x 20.8x 4.6x 1.2x 1.1x 1.1x 18.6% 6.5% 5.7% 7.0% 4.3% 3.9% PVI Petro Vietnam 3,572,475 81.1x 14.3x 20.8x 10.2x 5.0x 2.0x 1.6x 1.4x 6.2% 14.3% 7.5% 3.7% 5.5% 3.5% Average 52.9x 16.5x 20.2x 15.5x 4.8x 1.6x 1.3x 1.2x 12.4% 10.4% 6.6% 5.3% 4.9% 3.7% BVH Bao Viet 22,061,524 N/A 30.3x 50.3x 37.6x N/A 2.7x 2.7x 2.6x N/A 9.0% 5.3% N/A 2.6% 1.7% Source: HRS research, Bloomberg
Figure 3. Regional comparison with peer
Companies Country Market Cap. P/E P/B ROE ROA USDmln 2006A 2007A 2008A 2006A 2007A 2008A 2006A 2007A 2008A 2006A 2007A 2008A Ping An Insurance (Grp) Hong Kong 49,475.12 43.1x 18.1x 1,261.8x 7.5x 3.1x 4.7x 17.5% 17.4% 0.4% 1.6% 2.7% 0.0% PICC Property & Casualty Hong Kong 7,965.01 57.9x 26.1x 18.2x 3.1x 2.6x 2.1x 5.3% 10.0% 11.5% 0.9% 1.5% 2.0% Samsung Fire & Marine Insurance South Korea 6,442.79 34.5x 26.5x 19.0x 3.1x 2.9x 2.7x 8.9% 10.9% 14.3% 1.6% 1.8% 2.3% Dongbu Insurance South Korea 1,403.21 16.3x 16.3x 7.3x 3.4x 3.2x 2.5x 20.7% 19.7% 34.6% 1.6% 1.3% 2.4% Bangkok Insurance PCL Thailand 339.93 20.5x 17.3x 13.7x 1.0x 0.9x 1.3x 4.7% 5.1% 9.7% 3.2% 3.5% 5.6% Taiwan Fire & Marine Insurance Taiwan 164.2 8.0x 5.6x 40.1x 1.0x 1.0x 1.7x 12.7% 17.7% 4.2% 5.6% 4.9% 0.9% Average 30.0x 18.3x 19.7x 3.2x 2.3x 2.5x 11.6% 13.5% 12.4% 2.4% 2.6% 2.2% Median 27.5x 17.7x 18.6x 3.1x 2.8x 2.3x 10.8% 14.2% 10.6% 1.6% 2.3% 2.1% Bao Viet Vietnam 1,242.9N/A 30.3x 50.3xN/A 2.7x 2.7xN/A 9.0% 5.3% N/A 2.6% 1.7% Source: Reuters Note: We take out the outlier of Ping An in 2008 in calculation of average P/E
Please refer to the important disclosures at the end of this document .
Horizon Securities 2 Company note ––– Bao Viet Holdings (HOSE: BVH)
Corporate Highlights
Overview Founded in 1965, Bao Viet was equitized on 31 May 2007. Bao Viet has captured the leading position in the non-life insurance segment and is second only to Prudential in the life insurance market.
Figure 44.. Shareholder structure as of 29 May 2009 No of shares % Local 497,580,426 86.8% Institutional 481,087,753 84.0% Individual 16,492,673 2.9% Foreign 75,446,179 13.2% Total 573,026,605 100.00% Source: Bao Viet
Bao Viet Holding owns and operates a number of subsidiaries and affiliate companies such as Bao Viet Insurance (100%), Bao Viet Life (100%), Bao Viet Fund (100%), Bao Viet Securities (100%), Bao Viet Bank (52%), Vietnam International Insurance (51%), Bao Viet Invest (55%) and Bao Viet Au Lac (60%).
Non life insurance The Vietnam non-life insurance market grew 30% last year and we expect this market segment to grow at 16.8% CAGR from 2009 to 2013. Five local insurance companies currently dominate 80% of the market; the remaining portion is divided among 21 other local and foreign players.
In 2008, Bao Viet held top position in this market segment with VND3,319,978mln (US$187mln) in total gross premium, which represents a 30% market share and it has maintained its leading position in this market segment for many years.
Figure 55.. Top 5 in nnonon life segment Figure 66.. Market share 2008 VNDmln 3,500,000 20% 3,000,000 30% 2,500,000 2,000,000 4% 1,500,000 1,000,000 10%
500,000 0 19% 2006 2007 2008 17% Bao Viet PetroVietnam Insurance (PVI) Bao Viet PVI Bao Minh PJICO PTI Others Bao Minh Petrolimex JS Insurance (PJICO) Post & Telecom Insurance (PTI)
Source: Vietnam Insurance Association, HRS research Source: HRS research
Life insurance Foreign companies have dominated the life insurance segment in Vietnam and Bao Viet is the only local life insurance company in this sector. With a 25% market share Bao Viet is second only to Prudential Insurance. However, the competition is getting fierce and Bao Viet has been loosing market share to other rivals in recent years.
Please refer to the important disclosures at the end of this document .
Horizon Securities 3 Company note ––– Bao Viet Holdings (HOSE: BVH)
In 2008, Bao Viet’s total gross premium dropped 24.5% to VND510 billion (US$28.7 million). Prudential has aggressively expanded its market share at the expense of other players and has captured first position from Bao Viet in 2007 and has held that position ever since.
Figure 77.. Major playplayersers in life insurance Figure 88.. Market share in 2008 VNDmln 2% 11% 900,000 25% 800,000 8% 700,000 600,000 500,000 7% 400,000 300,000 11% 200,000 100,000 0 36% 2006 2007 2008 Bao Viet Prudential Manulife AIA Bao Viet Prudential Manulife AIA Dai-ichi Life ACE Life Dai-ichi Life ACE Life Others
Source: Vietnam Insurance Association, HRS research Source: HRS research
Industry overview
Vietnam’s life and non-life insurance market is growing rapidly. We estimate that the market should continue to see above 20% growth for non-life insurance and above 22% growth for the life insurance segment until 2013. Greater urbanization, increasing personal wealth, and the lack of insurance coverage are key drivers for the Vietnamese insurance industry.
Figure 99.. Non life premiums Figure 1010.. Life premiums VNDmln VNDmln 30,000,000 35,000,000
20.1% CAGR 30,000,000 22.6% CAGR 25,000,000
25,000,000 20,000,000 20,000,000 15,000,000 15,000,000 10,000,000 10,000,000
5,000,000 5,000,000
0 0 2007 2008 2009F 2010F 2011F 2012F 2013F 2007 2008 2009F 2010F 2011F 2012F 2013F
Source: Business Monitor Source: Business Monitor
Please refer to the important disclosures at the end of this document .
Horizon Securities 4 Company note ––– Bao Viet Holdings (HOSE: BVH)
Disclaimer
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Please refer to the important disclosures at the end of this document .
Horizon Securities 5