Analyst Research Report Snapshot


Cathay FHC (2882 TT, NT$44.3, OP): Maintain Outperform




KGI Greater China


31 Oct 2013





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Life business improving 3Q13 earnings NT$11.8bn, up 49.2% QoQ, on dividend income; 2013F & 2014F earnings raised 29% and 27% Cathay Life beneficiary of rising interest rates; negative interest spread estimated down to 10bps by end-2014 Life and banking businesses in China to benefit from policy opening Based on 2014 SOTP forecast and unchanged target P/EV of 1.0x for life unit & target P/B of 1.2x for banking unit; 12M target price up to NT$50 from NT$47; reiterate Outperform Cathay FHC’s shares have outperformed Taiex by 3.6% over the past three months and are trading at 1.85x 2014F BVPS, at the mid range of its historical of 1.2-2.5x. Our investment thesis is unchanged, namely that the life unit’s profitability will be enhanced along with yield curve normalization, while real estate reappraisal gains recognition raises the earnings buffer of NT$10bn per year till 2017. The FHC is also better positioned to benefit from cross-strait banking and insurance deregulation. We maintain our target P/EV for Cathay Life at 1.0x and target P/B for Cathay United Bank at 1.2x. Based on our 2014 sum-of-parts forecast, we raise our 12-month target price to NT$50 from NT$47. Maintain Outperform rating.

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