Inside the office of Post and Telecommunications Insurance Corp (HNX: PTI). Despite good earnings, insurance stocks have been undervalued for their modest dividend payout rates. - Photo pti.com.vn
HÀ NỘI – Most insurance stocks have underperformed despite a positive outlook for the Vietnamese insurance sector.
Ten insurance companies are trading on the Vietnamese stock market but only Bảo Việt (HoSE: BVH) has seen its share price approach VNĐ80,000, as its shares ended Monday at VNĐ78,600 per share.
Meanwhile, another nine stocks closed Monday at maximum VNĐ36,500 per share – almost half of Bảo Việt’s share price.
It is obvious insurance stocks are undervalued on the market despite their gains in earnings, local media reported.
In the first six months of 2019, Bảo Việt recorded its combined revenue was up slightly from the previous year to VNĐ20.9 trillion.
With a six-month post-tax profit of VNĐ670 billion, the company also fulfilled 54.6 per cent of its post-tax profit for the year.
Other insurance businesses such as Post and Telecommunications Insurance JSC (HNX: PTI), BIDV Insurance Corp (HoSE: BIC), Agribank Insurance (UPCoM: ABI) and Military Insurance Corp (UCPoM: MIG) also performed well in the first six months but their shares are not too expensive at the moment.
Another leading insurer – Bảo Minh Insurance Corp (HoSE: BMI) – on June 21 paid a 12 per cent dividend in cash to investors for 2018’s results. The company has not revealed its results in the first six months, but early forecasts point out the company will release good figures.
According to the Insurance Association of Vietnam (IAV), the domestic insurance market was strong in the first six months of the year.
Total revenue of insurance fees in six months increased 16 per cent year on year to VNĐ69.4 trillion. Of the figure, revenue of life insurance was up 17 per cent year on year to VNĐ44.2 trillion and non-life insurance rose 14 per cent to VNĐ25.2 trillion.
IAV figures mean insurance companies saw good earnings in the first six months. Therefore, there is plenty of room for insurance firms to improve earnings in the future, especially as Vietnamese people are paying more attention to insurance deals in order to prepare for risks.
However, insurance stocks may not be attractive to individual investors because of their modest dividend payout rates.
In recent years, insurance firms have been paying dividend payout rates of 10-15 per cent each year.
Bảo Việt plans to pay a 10 per cent dividend to investors between July and September for last year’s results. The amount of the dividend payout is estimated at VNĐ700 billion.
Its dividend payout rate has remained the same over the last few years.
However, the firm’s share trading liquidity is only 220,000 shares in each session, which is modest compared to other large-cap stocks.
A similar trading situation also happened to other insurance stocks as their liquidity is quite low.
But to institutional investors, insurance stocks do have value.
The buying in insurance stocks of institutional investors, especially foreign companies, will help local firms access international practices and standards to make impressive growth rates in the local market.
Recent deals are between the Canada-based FairFax and BIDV Insurance Corp, between Post and Telecommunications Insurance Corp and DB Insurance. – VNS