Aksigorta A.S. (AKGRT TI) - Headwinds from lower rates: Downgrading to Hold
Aksigorta posted strong results in 2019 and has become a brilliant dividend play in 1Q20. We think Aksigorta’s operating profitability will increase in 2020 but expect its earnings momentum to decelerate. Although the outlook for its technical profitability now appears more promising, we believe investment income should drop for Aksigorta as 66% of its investment portfolio comprises TRY time deposits. The TRY deposit rate fell 62bp YTD and 12ppt y-y in Jan 2020. Reflecting this, we think Aksigorta’s investment yields should decline by 9ppt to 13% in 2020 from 22% in 2019. We forecast net earnings to grow 2% in 2020 and 5% in 2021. Aksigorta trades fairly at FY20E P/B of 2.0x and P/E of 5.6x, with an RoE of a 39%. We have factored in a 96% combined ratio for FY20-22E.
We raise our GGM-based 12M TP by c26% to TRY7.42 based mainly on our lower CoE; downgrade to HOLD from Buy.
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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