Top Equity Ideas

June 2017
Equity Ideas to Grow Your Wealth

We only share with you stock ideas that we are convinced of ourselves.

What you are about to see in this publication is a distillation of the top equity calls from the research teams at OCBC Group, comprising 16 highly experienced equity analysts.

Our equity analysts offer independent research views on a wide range of equities through regular company visits and management meetings.

With good access to listed companies and key industry sources, the research team conducts fundamental, technical and quantitative analyses on companies, while regularly reviewing the stocks covered.

As you can see, we're going to great lengths to help you grow your wealth. And we hope you will find the insights we offer in this publication useful.

AIA Group Ltd
Strong 1Q2017 allay fears of slowing growth

The Hong Kong based insurance company had a stellar 1Q2017, with new business value (NBV) growing 53 per cent, a record high. Annualised new premiums surged 61 per cent year-on-year (YoY), to US$1.8b while product mix changes led margins down slightly by 2 per cent to 49 per cent. Outperformance by its Hong Kong and China markets should allay concerns over the capital controls impact on sales, as higher agent productivity in China led strong sales of protection and long term savings products while Hong Kong’s outstanding NBV growth across customer segments and distribution channels suggest continued strong sales from mainland visitors. Other markets saw strong NBV growth too, except Thailand and Singapore, which were affected by local issues. While the strong results should allay growth concerns, investors need to be wary that continued commoditisation of bancassurance channel will pressure margins and growth. Poor equity performance may also impact unrealised gains/losses as well as assets on the balance sheet, leading to lower than expected overall investment yield.

Our 12-month forecasts
Potential Upside:
13.02%
Target Price:
HK$62.50
Dividend:
US$0.08/Share
Dividend Yield:
1.13%
About the company
Current Price
HK$55.30
Market Capitalisation
HK$667.69b
Average Daily Volume (30 Days)
21.59m
Bloomberg Ticker
1299 HK

Source: Bloomberg as at 6 June 2017

 

AIA Group Ltd. offers insurance and financial services. The company writes life insurance for individuals and businesses, accident and health insurance, retirement planning, and wealth management services.

52-Week Price Movement
52-Week Price Movement

52-Week High: HK$55.8500

52-Week Low: HK$43.3000

Source: Bloomberg as at 6 June 2017

Key financial highlights
 
2016
2017E
2018E
Net Premium & Fees (US$ m)
20,641
21,276
23,800
Total Op. Revenues (US$ m)
26,728
27,618
30,840
Net Profit (US$ m)
4,212
3,785
4,246
Earnings Per Share (US$)
0.35
0.31
0.35

^ For the Financial Year ended 31 December

 

Allergan PLC
Drug pipeline holds potentially large growth opportunities

Through acquisitions, Allergan has transformed into a major diversified drug manufacturer with a broad patent-protected portfolio and a healthy drug pipeline. Allergan's acquisitions of Warner Chilcott and Forest Labs greatly enhanced the company's branded drug portfolio with a significant presence in the primary care markets of women’s health, gastrointestinal, urology, and central nervous system therapeutics. Allergan's considerable scale in niche markets of ophthalmology and aesthetics offers a long runway for growth, thanks to defensible products (especially Botox) and an attractive pipeline. Few competitors match Allergan’s product portfolio scope, brand recognition, and loyalty programmes in the cosmetic market, and recent therapeutic indications introduce Botox to new areas. Expect Allergan to remain focused on expanding its branded pipeline and sales force productivity through small acquisitions and licensing partnerships, although investors should be aware that some high-risk products have faced developmental challenges, such as the anti-VEGF DARPin, which is entering Phase III clinical trials.

Our forecasts
Potential Upside:
31.40%
Target Price:
US$300.00
About the company
Current Price
US$228.31
Market Capitalisation
US$76.68b
Average Daily Volume (30 Days)
2.59m
Bloomberg Ticker
AGN US

Source: Bloomberg as at 6 June 2017

 

Allergan plc. manufactures specialty pharmaceuticals. The company develops, manufactures, and distributes generic, brand, and over-the-counter products. Allergan offers its pharmaceutical drugs around the world.

52-Week Price Movement
52-Week Price Movement

52-Week High: US$260.2400

52-Week Low: US$188.4700

Source: Bloomberg as at 6 June 2017

Key financial highlights
 
2014
2015
2016
Revenue (US$ m)
13,062
15,071
14,571
Net Income (US$ m)
-1,631
3,915
14,973
Earnings Per Share (US$)
-7.42
10.01
38.18
PER (X)
-30.8
22.8
6.0
Return on Equity (%)
-8.6
7.4
20.6

^ For the Financial Year ended 31 December

 

The contents in this page are a summary of the investment ideas and recommendations set out in the Morningstar Equity Analyst Report.

BlackRock Inc.
Well-diversified product mix and investment strategies

BlackRock is the largest asset manager in the world, with US$5.420 trillion in total AUM and clients in more than 100 countries. BlackRock's ability to generate solid organic growth has been impressive, considering the size of its operations. The biggest differentiator for BlackRock is how it is positioned, with its scale, ability to offer both passive and active products, greater focus on institutional investors, strong brands, and reasonable fees. BlackRock's iShares ETF franchise, augmented by a technology platform that offers risk management and product/portfolio construction tools directly to end users, should allow the firm to generate higher and more stable levels of organic growth than its publicly traded peers over the next five years. BlackRock's sheer size and scale of operations could ironically end up being the biggest impediment to the firm's long-term growth, as despite accounting for close to two thirds of total long-term AUM, institutional client arrangements generate only one third of BlackRock's long-term base fees, given the lower fee structure attached to these large investment mandates. Actively managed funds account for 29 per cent of total long-term AUM, but generate just 48 per cent of long-term base fees, increasing the pressure on BlackRock to gets its active equity and fixed-income offerings on a consistent footing.

Our forecasts
Potential Upside:
11.16%
Target Price:
US$460.00
About the company
Current Price
US$413.83
Market Capitalisation
US$67.55b
Average Daily Volume (30 Days)
622.76k
Bloomberg Ticker
BLK US

Source: Bloomberg as at 6 June 2017

 

BlackRock, Inc. provides diversified investment management services to institutional clients and to retail investors through various investment vehicles. The Company manages funds and also provides risk management services to fixed income institutional investors.

52-Week Price Movement
52-Week Price Movement

52-Week High: US$414.7100

52-Week Low: US$319.5400

Source: Bloomberg as at 6 June 2017

Key financial highlights
 
2014
2015
2016
Revenue (US$ m)
11,081
11,401
11,155
Net Income (US$ m)
3,294
3,345
3,172
Earnings Per Share (US$)
19.25
19.79
19.04
PER (X)
23.9
23.2
24.2
Return on Equity (%)
12.2
12.0
11.0

^ For the Financial Year ended 31 December

 

The contents in this page are a summary of the investment ideas and recommendations set out in the Morningstar Equity Analyst Report.

Ping An Insurance (Group) Company of China Limited
Strong agency focus, with diversified business model

Ping An Insurance’s fundamentals remain strong amid challenging macro headwinds. Two of the integrated financial services conglomerate’s insurance subsidiaries (Ping An Life and Ping An Property & Casualty) jointly rank second largest in China based on premium income. Ping An Insurance reported a solid quarter for 1Q17 earnings, with net profit up 11 per cent year-on-year (YoY), to RMB23.1b, ahead of analysts’ expectations. The solid performance was driven by strong agency focus and diversified business model. Life insurance was the key highlight with new business value (NBV) surging 60 per cent YoY. The strong NBV growth likely implies product mix and margins improvement. Potential value may be unlocked by listing its Fintech and Securities businesses. Investors should remain alert for lower than expected investment yield, as a weak equity market may lead to unrealized losses and assets value. Higher than expected claims/loss ratio and worse than expected bank results could depress the group’s earnings too.

Our 12-month forecasts
Potential Upside:
11.21%
Target Price:
HK$56.55
Dividend:
RMB$0.80/Share
Dividend Yield:
1.81%
About the company
Current Price
HK$50.85
Market Capitalisation
HK$951.60b
Average Daily Volume (30 Days)
37.20m
Bloomberg Ticker
2318 HK

Source: Bloomberg as at 6 June 2017

 

Ping An Insurance (Group) Company of China Limited provides a variety of insurance service in China. The company writes property, casualty, and life insurance. Ping An Insurance also offers financial services.

52-Week Price Movement
52-Week Price Movement

52-Week High: HK$50.8500

52-Week Low: HK$33.1500

Source: Bloomberg as at 6 June 2017

Key financial highlights
 
2016
2017E
2018E
Net Premiums Earned (RMB b)
441.6
529.1
628.9
Total Revenues (RMB b)
721.6
826.6
950.6
Total Claims
(RMB b)
627.1
725.7
842.6
Net Profit (RMB b)
62.4
66.7
71.4
Earnings Per Share (RMB)
3.50
3.74
4.00

For the Financial Year ended 31 December

 

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