Post by
SunsetGrill on May 12, 2022 4:24pm
TD Analysis
Recommendation: ACTION LIST BUY
Risk: MEDIUM
12-Month Target Price: C$34.00
Prior: C$37.00
12-Month Dividend (Est.): C$1.35
12-Month Total Return: 45.2%
Market Data (C$)
Current Price C$24.35
52-Week Range $22.75 - $28.09
Mkt Cap (f.d.) ($mm) $47,287.7
Current Dividend $1.32
Dividend Yield 5.4%
Avg. Daily Trading Vol. 13,159,070
Financial Data (C$) Fiscal Y-E December Shares O/S (f.d)(mm) 1,942.0 Float Shares (mm) 1,926.0 LICAT 140% ROE 11.8%
Event MFC reported Q1/22 core EPS of $0.77, down 5% y/y (estimate: $0.82; consensus: $0.82), reflecting lower Asian new business gains (lockdowns) and lower earnings on surplus (seed capital losses), partially offset by positive experience gains. Core ROE was 11.8% and BV/share was up 13% y/y (up 13% ex-AOCI) and down 2% q/q (up 3% ex-AOCI). Relative to our estimates, lower new business gains, seed capital losses (reported in earnings on surplus), and lower WM earnings were offset by much better P/H experience (Canada). LTC P/H experience remains favourable. Impact: NEGATIVE Asia sales (US$) were down 18% y/y and 12% higher than our estimate of $742mm reflecting lockdowns in Asia (including H.K.) and much lower sales in Japan (COLI). Asian new business gains were down 49% y/y and 32% lower than our forecast indicating the new business margins were extremely weak in Asia. Lower new business margins reflect the unfavourable product mix in China and lower sales in high margin regions. Lockdowns in Asia have a significant impact on sales because most products are agency-distributed. The reach of MFC's Asian distribution and product breadth suggests sales and new business gains should recover abruptly as lockdowns are relaxed. We did not materially change our 2023E new business gain forecast (IFRS 4-based). WM net inflows of $6.9bln were up five-fold y/y and 20% lower than forecast reflecting lower fixed income sales. Asian and U.S. retirement net flows remain healthy. WM earnings were up 6% y/y and 11% lower than expected, reflecting lower AUM (impact of rates was greater than expected). The pretax margin in WM was up 40bps y/y and 60bps lower than expected. We lowered our 2022/2023 WM earnings forecast by ~15%. TD Investment Conclusion Our positive outlook on MFC reflects: 1) greater confidence that the legacy businesses will not result in material hits to reported earnings and capital strength; 2) a strong capital ratio from the perspective of LICAT and core LICAT; 3) businesses that should support growth and an improving ROE — Asian Insurance and WAM; and 4) valuation (including the impact of IFRS 17).
Valuation On our core 2022E and 2023E EPS, Manulife is trading at 7.5x and 7.2x, respectively, compared with the five-year average (two-year forward) of 7.8x. On our core 2022E EPS, Sun Life is trading at a premium P/E multiple of 10.4x.