JP Morgan sees "good" entry point into Aviva, reiterates 'overweight'
Aviva
465.40p
16:45 24/04/24
JP Morgan sounded a 'bullish' note on Aviva, telling clients the shares are "cheap" and that the insurer's cash flows would allow it to both grow its dividend even while carrying out share repurchases and strengthening its capital position.
FTSE 100
8,040.38
16:34 24/04/24
FTSE 350
4,419.71
17:09 24/04/24
FTSE All-Share
4,374.06
16:44 24/04/24
Life Insurance
5,833.57
17:09 24/04/24
Following 4% underperformance of the wider sector since July and trading on 8.3 times' JP Morgan analysts' earnings estimates for 2019, the shares were "cheap" and offered a "good" entry point, the investment bank said.
By way of comparison, it pointed out that the sector was trading at an average price-to-earnings multiple of 10.
Furthermore, the shares were offering a total capital return yield of over 7%.
In particular, JP Morgan noted that Aviva's cash flows over the next three years would suffice to increase the dividend at a compound annual rate of 10% between 2017 and 2019, carry out a £300m share buy-back each year and cut its net debt by £1.1bn in the coming three years.
On the downside, the analysts pared their earnings per share estimates for Aviva in 2017, 2018 and 2019 by -1%, -5% and -3%.
However, that would be offset in part by an improving capital position and by creating additional headroom to deploy capital in an attractive fashion moving forward.
So while the target price was trimmed from 624p to 617p, JP Morgan reiterated its 'overweight' recommendation.