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Canaccord lowers target price on 'still attractive' GBG
With GBG's emphasis switching from income to capital growth, analysts at Canaccord Genuity lowered their target price on the internationally focused insurance and benefits provider on Monday.
However, Canaccord reiterated its 'buy' rating on GBG despite its "shaky start to life" since listing on AIM back in February last year, acknowledging that, while management does need to recover the market's trust, it did not believe the group's underlying growth or risk appetite had "materially changed".
GBG is provider of international benefits, the self-proclaimed largest integrated provider in the world, serving expatriates, third-country nationals, locals and companies with health and travel insurance, life insurance, income replacement and special risk protection.
Despite hits to GBG's capital coming in the form of a $12.3m provision against Angolan receivables, which reduced its tangible net asset values by a third, a fraction less than its stock has lost since warning investors that its operations in the African nation would weigh on profits back on 19 March, Canaccord still felt the insurer showed a sufficient buffer to regulatory requirements.
On the other hand, Canaccord pointed out that GBG's board had "shown caution" on dividend commitments, prioritising improvement in capital strength, something the broker viewed as primarily being a defensive measure to mitigate risk to its credit rating.
The removal of Angola's contribution was seen as likely to act as an earnings headwind throughout 2018, however, from 2019 onwards Canaccord expect GBG to return to "high-teens earnings growth".
Discussing GBG's "attractive valuation", Canaccord reduced its 12-month forward target price to 155p from 200p, primarily reflecting the Angola provision.