French parent’s bid undervalues AXA

French insurance giant Axa SA's $3.1 billion bid to buy out the shares it doesn't already own in Axa Asia Pacific (AAP) values the subsidiary at a large discount to fellow-life insurer AMP, according to analysts. Axa SA's $3.75 cash and scrip bid implies a 13.5 times multiple of AAP's annualised first-half results, says Deutsche Equities. In comparison, AMP is at a 19 times multiple. UBS estimates the bid is valued at 14.6 times 2005 earnings, compared with AMP at 17.5. AAP reported its first-half results on Friday, which were 18 per cent above forecasts. Its South-East Asian businesses lifted premium revenue by 64 per cent to $206 million. The dividend was raised to 5.25 cents a share, partly franked, from 4.75 cents in 2003.

Analysts say Axa SA's bid of $3.75 a share is at only a 9 per cent premium to the indicative value of $3.45 a share published by AAP in March. The valuation was based on December figures and should have risen by about 5 per cent since.
Axa's bid is too low and would have to be raised to $4 a share or more if it were to be seriously considered, according to Shaw Stockbroking. AAP's board is being advised by Macquarie Equities which had a 12-month $3.49 cents-a-share price target on the stock before Friday's result was announced.