Safe Trading Blog

Dow Jones +2.16% && NASDAQ +2.18%… This is a nice close confirming our short term analysis (see previous posts). The plan is to book profits on our running positions (*) next week! More later…

(*) http://www.safetradingblog.com/stock-code-trading/bounce.html

 PS: short comment on AXA (our french financial “favorite”)

Stock recommendation
Opinion: Buy
AXA’s valuation remains attractive for an annual EPS growth of 10-15%. Despite the decelerating growth in Life New Business, the central target of the Ambition 2012 plan still looks achievable, in particular with the launch of new, high margin products in Europe with attractive features. Equity markets’ fall will penalize 2008 (increase in regulatory reserves?), however AXA keeps a good fundamental potential thanks to targeted acquisitions of additional distribution networks, to margin improvement, to a high quality risk management and to no exposure to either banking, industrial risks or reinsurance.

Price Target : Eur 32 €

Target equal to 1.4 times the 2008e book value. The EPS growth profile and the quality of the franchise justify a valuation premium. Keys points + Structural organic growth in Life & Savings. AXA ranks well among leading global insurers thanks to its wide distribution platform and its innovation capabilities. + Further productivity improvements: economies of scale, industrialisation of best practices, stringent cost control. + Management is highly regarded for the operational improvements implemented since 2000. In particular it enjoys high credit for its track record in external growth and integration of targets. +/- The AXA share has a high Beta, it is penalised by lower equity indices but boosted by interest rate cuts. Management regrets the high index sensitivity and the lack of defensiveness of the share, but it remains somewhat powerless at changing market perception. - Asset Backed Securities exposure is €11bn. US subprime is modest (€1.5bn, 4% of shareholders’ funds). Exposure to US monoline insurers is weak.
- AXA’s past growth was to a large extent external: performance of the shares is often capped by fears of a major acquisition.
- The current dollar weakness is not favourable and the true impact of markto- market valuation of financial assets is still to be felt.

This entry was posted on Friday, March 21st, 2008 at 7:56 am and is filed under Stock Code Trading, US Markets, non-US Markets. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.