BUY SBG Securities has a negat i ve v i ew on t he i nsurance group. This fol lows a sharp sel l- off in the share following an operational update from MMI. Highly-regarded insurance analyst Risto Ketola noted: “Our sum- of-t he-parts valuation of MMI stands at R20.87 (from R21.31) and our 12-month price t arget has been reduced accordingly to R22 (from R22.50). The 50cps reduction in the price target should be seen in light of the 51cps dividend paid since our previous MMI report. The negative impact from adjustments to persistency and business mix has been offset by some uplift to the volume forecasts and also favourable equity market moves over the past six weeks.
Our fair value i mplies t hat MMI should be trading at just below 1x EV (which would still be above ‘norm’ for SA insurers) rather than at the current 20% premium. We maintain our ‘Sell’ recommendation on MMI.”