Great Eastern

Great Eastern: OSK-DMG maintains Buy, TP $24.50, poised for re-rating. A flurry of recent M&A deals in Southeast Asia’s insurance sector puts the spotlight on GEH’s under-rated insurance franchise. Canada’s Sun Life Financial and Khazanah Nasional bought the Malaysian jv insurance business of Aviva-CIMB for US$596m at a pricey multiple of 2.9x book value and 2.4x price/embedded value. AIA’s purchase of ING Malaysia’s life insurance operations for US$1.73bn, and Prudential’s purchase of Thai Thanachart Life for US$590m. The high transaction multiples in these M&A deals reinforces view that GEH is substantially undervalued, trading at 1.7x P/BV and 1x P/EV, and has scope for re-rating given its dominant position in SG and Msia and a growing presence in Indonesia and Vietnam. Share price catalysts include: 1) Higher dividends for FY12 with the $422m gain generated from the sale of APB/F&N shares; 2) clearing of overhang from institutional selling and 3) a third privatisation attempt by OCBC Group. pegged TP at $24.50 on a multiple of 1.55x P/EV for its core insurance business and attribute $4.35/share for the excess capital within the group.