Analyst report for Manulife

11 JUNE 2014
INITIATION
71
HONG KONG / INSURANCE

MANULIFE FINANCIAL CORP

945 HK

HOW WE DIFFER FROM CONSENSUS

BUY

TARGET PRICE
CLOSE

MARKET RECS

TARGET PRICE (%)

+23.2

POSITIVE

17

EPS 2014 (%)

+25.6

NEUTRAL

2

EPS 2015 (%)

HKD206.87

+10.4

NEGATIVE

1

HKD146.00

UP/DOWNSIDE

+41.7%

CHANGE IN TP

HKD
VONTH%

KEY STOCK DATA

Powered by life and wealth

YE Dec (CAD m)

Initiate at BUY: HKD206.87 target price implies 1.33x FY15E P/EV
Manulife Financial Corp (MFC) is one of the Asian ‘Big Four’ life insurers and in the top three in Canada and the US. MFC is also a global asset manager, leveraging the favourable demographics in
Asia and North America. We initiate at BUY with our actuarial appraisal valuation implying 42% upside from current levels.
Asia to drive life VONB, North America to drive wealth VONB
We expect Asia to drive 9-12% pa life VONB growth in 2015-16, with
Japan the biggest contributor, then HK and Indonesia. We expect the
US and Canada to drive 10-11% pa wealth VONB growth in 2015-16 as the development of MFC’s asset management bears fruit, and replaces its run-off variable annuity products.

2013A

2014E

2015E

2016E

Core earnings

2,617

2,901

3,504

4,210

Net profit

2,999

3,663

3,732

4,232

Reported EPS (CAD)

1.63

1.97

1.99

2.23

Core EPS growth (%)

14.8

9.5

19.5

18.8

9.8

10.7

7.2

6.5

EV growth (%)
VONB growth (%)

17.4

3.7

9.6

11.5

Dividend yield (%)

2.61

2.53

3.37

4.11

P/EV (x)

1.09

0.97

0.91

0.94

Core ROE (%)

10.9

10.6

11.6

12.7

Jun-13
170

Sep-13

Dec-13

Mar-14

Jun-14
24

150

Core earnings CAGR to accelerate to 17% in 2013-16E
MFC differentiates itself with its alternative long-duration assets investing approach, which led to a solid 5.3% average investment return in 2005-13. With CAD400m worth of