Good sets of result delivered
Investment Thesis
US bond yields to accelerate on an upward trend in FY22F. The US 10-year bond yield rose to 1.9% in February 2022, the highest level since 2019. In anticipation of faster tapering and US rate hike expectations, US bond yields are set to rise further in FY22F. Our DBS economics team forecasts US 10-
year bond yields to reach 2.5% by end-FY22.
Expect VNB growth to reach 22% in FY22F. Improving visibility in value of new business (VNB) is expected, driven by strong new business demand in Asia ex-Japan market. We expect VNB to expand by 22% y-oy in FY22F.
Business optimisation efforts provide flexibility: Continuous portfolio optimisation and expense efficiency efforts can provide flexibility on capital deployment and balance sheet strength for further growth. The company is well on-track to meet its medium-term financial and strategic priorities.
Valuation:
Our target price is based on 0.9x 12-month forward P/EV, in line with the historical 5-year mean.
Where we differ:
Consensus is 50%/50% positive/neutral on Manulife, and we believe the market continues to underestimate the strong VNB growth outlook driven by strong Asia ex-Japan demand and a better product mix. We forecast VNB growth to reach 22% in FY22/23F.
Key Risks to Our View:
Significant drop in interest rates, rising equity market volatility, and slower-than-expected Asian market growth.