Aksigorta A.S. (AKGRT TI) - Outlook bright but priced in: Downgrading to Hold
We continue to foresee Aksigorta’s 2018 net earnings growing 64% y-y to TRY208m and 5% y-y to TRY219m for 2019. Both technical line and investment income should support earnings in 2018. We expect underwriting profit to rise to TRY65m in 2018 and TRY71m in 2019, with margins of 2.2% for 2018 and 2.0% in 2019. Over the next three years (2018-20), we forecast an average investment yield of 10.2% and an average operating margin of 11.3%. We assume a long-term combined ratio of 96% over our forecast period (2018-24). We envisage ROE rising to an eye-catching 30% in 2018 with a long-term ROE of 26%.
We keep our GGM-based 12M TP unchanged at TRY4.62/sh assuming a CoE of 17.75% and a long-term ROE of 26%. Aksigorta is trading at 6.3x 2018E P/E and 1.8x P/B for a 3Y EPS CAGR (2016-19E) of 22% and a 2018E ROE of 30%. We downgrade our rating for the stock to HOLD from BUY on limited upside potential after the stock’s c60% rally over the last one year (versus ISE National 100 index return of c11%.
Aksigorta is an international insurance group. Co.'s main operations include insurance activities based on non-life insurance branches, including primarily fire, marine, personal accident, engineering, agriculture and health. Co. focuses its business activities in Europe and Asia, which are grouped around four segments: Belgium, U.K., Continental Europe and Asia and served through a combination of wholly owned subsidiaries and partnerships with financial institutions and key distributors around the world. Co. operates in Turkey.
TEB Investment equity research analysts and strategist team consists of 8 analysts with an average finance sector experience of 15 years and special focus on international investors.
With our 6 equity research analysts we cover 93 companies across 21 sectors, reflecting 80% of the total market capitalization of all BIST companies and 86% of the BIST100 companies. Our strategy team provides in depth top-down and bottom-up market views with insight on FX and bond markets by publishing sectoral and strategic reports both in English and Turkish.
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