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Cathay reports strong year-end assets
LOWER THAN EXPECTED:
Analysts said the appraisal may seem a bit low because price increases in commercial properties from the first quarter were not included
By Joyce Huang
STAFF REPORTER
Saturday, May 03, 2008, Page 12
Cathay Financial Holding Co (瓣北), the nationˇs largest financial group by capitalization, reported a strong showing in asset value as of the end of last year although its first-quarter finances were pushed into the red.
Flagship unit, Cathay Life Insurance Co (瓣关), was estimated to have an embedded value of between NT$347 billion (US$11.39 billion) and NT$390 billion, or between NT$37.7 and NT$42.4 per share of the value of parent company Cathay Financial as of the end of last year, the companyˇ spokesman Lee Chang-ken (┌) told an investor conference yesterday.
That represents growth of between 13.3 percent and 14 percent, compared to the 2006 level, but the figure was lower than analysts expected.
Dexter Hsu (�?w), a Taiwan equity research analyst at JPMorgan Chase & Co, had previously expected Cathay Financial to see a 30 percent annual growth in its embedded value.
Embedded value is often used to refer to the present value of insurance firms while appraisal value indicates future profits.
Hsu said he was unimpressed with the lower-than-expected asset value and held a ¨sell〃 rating for taking profit on Cathay Financial shares since ¨thereˇll be no upside from [the companyˇs] new businesses this year except for its rising property value〃 given its rosy performance last year.
Since the appraisal was completed by yearˇs end, Lee explained that the figures may seem conservative because significant price hikes of commercial properties in the first quarter were not included.
¨In a bull market, the appraisal, which is based on an average price, does seem to be underestimated,〃 Lee said.
The companyˇs appraisal value, which also includes the value of new insurance policies, further boosted the companyˇs assets to between NT$622 billion and NT$757 billion, or NT$67.6 and NT$82.3 per share of the value of Cathay Financial, Lee said.
Shares of Cathay Financial closed up NT$0.7 at NT$86.2 on the Taiwan Stock Exchange yesterday before the release of its first-quarter results.
The company reported NT$6 billion in losses in the first quarter becuase of NT$27.4 billion in foreign exchange losses and NT$1.8 billion in losses from collateralized debt obligations, although its insurance subsidiary saw a 36 percent and 87.5 percent year-on-year growth respectively in its total premium incomes and first-year premium in the first quarter.
Its banking arm Cathay United Bank (瓣地蝗︽) also improved its asset quality to reach a 1.2 percent bad-loan ratio in the first quarter, down from 1.7 percent a year earlier.
The bankˇs executive president Joseph Jao (那达) expressed an upbeat view toward the bankˇs declining bad-loan provision although the impact from further defaults stemming from the implementation of a personal bankruptcy law on April 11 remains to be seen.
He said that, so far, the bank has entered pre-bankruptcy negotiations based on 267 applications, which have a total value of NT$100 million.
Meanwhile, Cathay Financial yesterday decided to give shareholders NT$3.0 per share for dividends for last year, comprising NT$2.5 in cash and a 5 percent stock dividend per share, resulting in an 89.8 percent payout ratio.
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