Singapore's Temasek Holdings sold its stake in New China Life, China's third largest insurer, on Thursday after launching a 78 million share block trade after the market close.
Joint leads Goldman Sachs and UBS marketed the deal at HK$27.30 to HK$27.85 per share before pricing towards the bottom of the range at HK$27.45. This represented a 5.5% discount to the stock's HK$29.05 close.
About 100 accounts placed orders in the $276 million deal but allocations were skewed towards a couple of large anchor accounts, which the leads had built the deal around.
“This is not a particularly liquid stock so the deal represented a hefty 40 days trading volume,” said one observer close to the deal. “This made it important to limit allocations to fast money accounts.”
However, the deal’s chief attraction is likely to have been the market’s underlying momentum since beta-related China plays have all benefited from significant share price performance over the past month. “A lot of accounts still feel they’re structurally underweight in China so this was a good opportunity to try and rectify that,” one participant remarked.
New China Life, for example, has risen 20% since June 23. Year-to-date, it is up 11.7% to trade at 13.21 times forward earnings and 0.8 times embedded value.
At this level, it is trading at a discount to both China Life and Ping An and at the tightest A/H share premium. China Life is currently valued at 1.3 times embedded value and Ping An at 0.9 times.
Both China Life and Ping An are still down year-to-date but have been on the receiving end of strong buying momentum since the beginning of the week. The former is up 8.6% since Monday but down 9% year-to-date, while the latter has risen 10.3% since Monday but is still down 7.5% since the beginning of the year.
For its FY13 results, New China Life reported a 6.1% increase in gross written premiums to Rmb103.6 billion ($16.72 billion). Embedded value also rose 13.3% to Rmb64.07 billion ($10.34 billion), while net profit was up 51% year-on-year thanks to lower impairment losses.
During its result presentation, the company said that one of its strongest growth areas is health insurance, which rose 32.06% on the year to Rmb7.63 billion. This equated to 7.36% of its overall sales, up from 5.91% the previous year.
Its market share stayed flat at 9.6%.
