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Ping An shares soar on upbeat outlook

(Agencies)
Updated: 2009-04-09 11:59

Shares of Ping An Insurance, the world's second-largest insurer by market value, rose as much as 8.5 percent on Thursday as investors shrugged off its weak fourth quarter and instead focused on its more upbeat 2009 outlook.

Ping An posted a 1.34 billion yuan ($196 million) loss for October-December, taking a hit on its investment in failed European financial group Fortis. Earnings for the full year, excluding the Fortis investment, came in more-or-less in line with market expectations.

But analysts saw a brighter outlook for the Chinese insurer, which is expected to benefit from a stabilizing stock market and rapidly growing premium incomes.

"The headline numbers may look bad but if you dig deeper, the embedded value and new business growth both look strong," said an analyst with a European investment bank, who did not want to be named due to company policy.

Related readings:  Ping An Insurance 2008 net profit down 94.4%  Ping An executives say confident about 2009 premiums  Ping An plans private equity unit this year  Ping An insurance premiums rise 8%

"More significantly, at the investor conference today the management seemed very confident about the company's outlook," he said.

Ping An hosted an investor conference on Thursday afternoon.

Merrill Lynch raised its target price on the stock by 12.5 percent to HK$54 on expectations of higher premium growth and lower investment losses and a sustained rally on the mainland Chinese bourse.

"We believe the worst is over for Ping An and we do expect strong recovery in profit and premiums," Karen Chan, analyst with Merrill Lynch, wrote in a note to investors.

Some of the overhang on the stock was also removed on relief that Fortis-related losses are now fully reflected in Ping An's books, analysts said.

The Hong Kong-traded stock ended up 7.7 percent at HK$52.30, outperforming the 3.0 percent gain on the main index. After slumping 55 percent in 2008, Ping An shares have bounced nearly 40 percent so far this year, partly helped by the rebound in Chinese mainland equity markets.

Shanghai-listed shares of the insurer rose 6 percent on Thursday. The benchmark Shanghai Composite Index has rebounded more than 30 percent in 2009, while Ping An's Shanghai-listed stock has risen 55 percent over the same period.

In Hong Kong, the stock is trading at around 23 times its estimated earnings, compared with larger rival China Life's valuation of about 21 times.

While the stock may come under some selling pressure in the near term following its strong run-up so far this year, March premiums data and its first-quarter earnings should act as catalysts, said analysts.

Ping An posted a 1.34 billion yuan ($196 million) loss for October-December 2008, due to losses related to its investment in failed European financial group Fortis. Earnings for the full year, excluding the Fortis investment, came in more or less in line with market expectations.

But analysts see a brighter outlook for the Chinese insurer, which is expected to benefit from a stabilizing stock market and rapidly growing premium incomes.

"Sentiment for the full year will continue to be fuelled by a better investment and premium outlook," said Merrill Lynch analysts.

The brokerage raised its target price on the stock by 12.5 percent to HK$54 on higher growth expectations.

Some of the overhang on the stock was also removed on relief that Fortis-related losses are now fully reflected in Ping An's books.