Thai Reinsurance

Thai Reinsurance Plc (THREL)
Upside from possibly higher THREL IPO price
THRE: Chance of higher IPO price for THREL. The IPO of THREL, scheduled for
September 26-30, will be a key share price catalyst for THRE. We were told unofficially
that the IPO price for THAIRE Life Assurance Public Company Limited (THREL) could be
in the neighborhood of Bt10/share, above our expectation of Bt6-8/share. Our TP for
THRE of Bt5.4 is based on a fair value for THREL of Bt7.5/share. A higher IPO price than
estimated would give THRE upside risk from gain on THREL and lift our target price.
Watch for THRE B/S clean up after THREL IPO. THRE is considering taking part of
the gain from selling THREL in its IPO to make a bullet booking in 3Q13 of additional
reserves for potential flood claims to clean up its balance sheet. This could be a S-T
negative surprise but is a good move for the long run. It may also pave the way for the
auditor to certify its financial statement, cementing investor confidence.
Maintain Buy. We maintain BUY on THRE, underpinned by upcoming catalysts: IPO of
THREL at the end of September, resumption of dividends in 2014 and credit rating
upgrade by S&P within the next three years, allowing THRE to return to the
international reinsurance market. We leave our TP unchanged at Bt5.4/sh (3x average
2013F and 2014F BVPS plus Bt0.73/share for value of post-IPO holding in THREL).