20150714_BSC_Vietnam Company Research_EN_BMI_ICB8530

We recommend BUY to BMI for medium and long-term investment, with 1-year target price of VND 31,800 / share, upside 19.2% compared with the closing price on  July 11th 2016, based on PB and PE valuation methods

In 1st quarter 2016, BMI recognized VND 779.3 billion of insurance gross written premium (+ 15.8% yoy), and VND 38.6 billion of PAT (+ 19% yoy). The main contributor to the profit growth was underwriting profit, which reached 26.8 billion (+ 336% yoy). The effective cost management reduced combined ratio of BMI to the lowest of the sector at 95.6%, although the claim ratio increased strongly. Investment activity was negatively influenced by the expenses related to the conversion of SDF to MBB in 1st Quarter, thus fell by 56.4% and profited at VND11.5 billion.
For 2016 and the coming years, we believe that BMI business outlook is positive:
(1)    Sustainable development orientation are showing good results in the insurance operation: BMI has the lowest combined ratio in the sector for many years, although its main product, fire insurance, usually yields higher risk.
(2)    Restructuring investment activities. Bao Minh is restructuring its investment portfolio, handling inefficient investments, and recorded profit from some long-term investments. The restructuring activities will help the companies record a significant growth of profit in 2016, and help reduce the burden of provisioning in the coming years. We expect to see a significant increase in financial income in the 2Q 2016.

2016 earnings forecast: We forecast that gross written insurance premium will reach VND 3,089 billion (+ 9.5% Yoy). The company's PAT is estimated at VND 189.2 billion (+ 46% Yoy), corresponding to 2016 EPS of VND 2,226. Dividends are expected to remain at 10% / year.