[ET Net News Agency, 18 October 2019] UBS Global Research lowered its target price for
AIA Group (01299) to HK$90 from HK$92 and maintained its "buy" rating.
The research house said AIA's 12-month forward P/EV has fallen 17%, to only 1.6x, since
its year-to-date peak. UBS's scenario analysis suggests the negative impact of AIA Hong
Kong's growth is well priced in, as its most bearish case still indicates 2020 RoEV of 14%
versus the historical average of 13.4%.
Following its in-depth discussion on China with AIA's regional CEO, UBS noted that (1)
AIA will likely begin a geographical expansion in China in 2020; UBS thinks 1-2 provinces
a year is a realistic pace; (2) a city-based strategy should help AIA to replicate its
premier agency model and protection-oriented product mix; (3) China's organic growth will
likely be self-fundable; (4) deregulation of municipal bonds and AIA China's potential
subsidiarisation could improve investment flexibility; and (5) AIA's strong brand and
advisory service, supported by its high-quality agents, help it to avoid adverse price
competition. (KL)