Natmut Continues To Underperform

The Age

Friday April 2, 1999

JILL FERGUSON

While National Mutual pocketed around $200million yesterday from selling its 16.9per cent stake in CGU Insurance, the group continues to be one of the market's chronic under-achievers.

Despite its arch-rival, Colonial, outpacing the market by 6per cent since January, NatMut has disappointed, underperforming the benchmark All Ordinaries and All Industrial indices by 18 per cent.

``The stock is poison, even at these levels; institutional investors don't want to touch it," one trader said of NatMut.

On valuation grounds, NatMut is trading at a discount to its $2.60 appraisal value while both AMP and Colonial are trading at significant premiums.

``NatMut's trading at a huge discount to the market, but it probably deserves to be there. Operationally there's no new revenue growth coming through, and while Asia is looking good, there's no obvious reason to buy the stock," one analyst said.

Some analysts attribute the market indifference to strategic paralysis under NatMut's new managing director, Mr Tony Killen.

``The company is pumping out the same products through the same distribution network that they did three years ago," one analyst said.

``If they came up with an Australian plan - namely acquire BT Funds Management - the stock would re-rate very quickly," he added.

Axa, NatMut's French parent, is rumored to have flown over a mergers and acquisition team and NatMut has acknowledged it is looking at BT. But, even with price targets hovering between $2.90 and $3.10, NatMut will need to produce a strong interim result next month to avoid a further slump.

With the market predicting a result between $150million and $175million, analysts expect a big turnaround from the Asian business, further cost cutting in Australia and some signs of revenue growth.

© 1999 The Age

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