OCBC Investment Research has lifted AIA’s fair value to $120.
OCBC Investment Research (OIR) has lifted its estimates and fair value of insurance corporation AIA Group to $120 amidst firmer growth expectations in China, which is expected to drive the group’s new business value growth amidst its steady expansion to its target of 12 new regions by 2030.
The new fair value is based on the sum of parts valuation and implies approximately 2.5 times forward price or embedded value.
OIR expects investors to look past near-term operational challenges due to the pandemic, which should ease as vaccine rollout progresses over the course of the year. They view AIA as “a beneficiary of the rise of Asia’s middle class with growing protection and wealth accumulation needs.”
Prudent management, strong execution, and well-trained agents drive sustainable new business growth and margin expansion from higher margin products, according to OIR analyst Camilia Goh.
“Although impact from the pandemic may continue to weigh on group performance near term, we see a sequentially improving outlook ahead supported by further normalization of its business as mass vaccination materializes and progress in its China expansion plan which should drive the group’s new business value growth,” Goh said.
AIA’s China expansion plan is shaping up further, with plans to establish regional hubs in Beijing, Shanghai, and Sichuan to support the group’s expansion.
“We continue to favour AIA as one of our preferred sector picks due to its robust cash flow generation, solid solvency position, steady track record and strong sales force,” Goh added.
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