E In Memoriam And Global Roundup

The Hong Kong insurer will work more closely with Citibank (C) to boost its market share in Chinese life insurance, paying the bank more than the $800 mn it handed over in 2014, but it did not give any details of the new arrangements.

Old Mutual (ODMTY), a UK financial business (including Old Mutual Asset Mgmt now NYSE-listed as OMAM) is South African by origin but now focused on wealth management in Britain and the developed world. Its emerging markets business does very well and should grow and “prosper over the next few years,” wrote Martin Ferera who found the share. Its South African “discount could evaporate”.

Merrill Lynch summed up the 2014 result which came out yesterday: "Beats on every line”.

And in fact each business line beat profit expectations producing overall operating profits of £1.605 mn.

  • Emerging markets came in at £617 mn (vs BofAML estimate of £581mn), up 4% YoY on a constant currency basis but up 23% in South African rands (ZAR). EM was boosted by consolidating a sub but mostly from general insurance business recovery.
  • OM Wealth operating profits at £227 mn also beat Merrill's estimate (£218mn), up 5% Y/Y as 11% underlying growth offset disposals.
  • Part-owed Nedbank profits at £770 mn beat by 2%.
  • OMAN-NYSE operating profits at £131 mn expectations by 15 % in the first post-IPO period.

Merrill had only one grouse: non-operating expenses of £140m topped forecast £112 mn.

Net client cashflows of +£11.2 bn topped Merrill forecasts by 5% and consensus by 26% mainly thanks to strong sales. Emerging Markets gross sales at £10.4 bn beat by 7%, boosted by strong growth in corporate gross sales, up 46% Y/Y.

OM Wealth gross sales at £16 bn were 2% ahead. Old Mutual Global Investing (no relation) now manages 12% assets under management (AUM) in house, up nearly 50% from 2013. Merrill expects that eventually AUM can reach 30%. Total group AUM broadly matched consensus at £319.4 bn.

Merrill summed it up: Old Mutual “delivered impressive 2014 results despite a tough macro backdrop” It favors “longer term restructuring of the group into its developed and emerging market components, [to] unlock the significant group discount.”

ODMTY trades at 9.6x 2016 earnings despite group businesses which should command a double-digit p/e ratio, Merrill thinks. “Unwinding the group structure and discount may take 2-3 years, in our view, but investors will be paid to wait.” That refus to the 4.6% 2015 estimated dividend yield.

• Chris Loew writes on his latest ADR pick, Daihatsu: The performance numbers for DHTMY don't look right - showing numbers for DHTMF, an OTC Daihatsu share, but illiquid.

Since we bought, DHTMY came out with Q3 figures (to end Dec) and yesterday, with their January sales. For Q3, there was a y/y fall in operating income of 47%, while net sales fell 6%. January net sales also decreased y-o-y, both in Japan and overseas. Unit sales actually increased in Q3 because of the introduction of new mini-vehicles, especially the new "Wake" model, but production and launch costs cut into profits. Considering that six new models were released , each with costs for tooling changes and advertising campaigns, this is reasonable.

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