Nrma Worth $5bn: Bank

Sydney Morning Herald

Friday July 9, 1999

By ANNA FENECH

The sharemarket value of the demutualised NRMA could be as much as $6 billion, analysts said, with most expecting a valuation closer to $5 billion.

Also, the average NRMA member could be entitled to shares worth $3,000.

NRMA members continue to debate the merits of demutualisation, with the issue expected to dominate the NRMA's board elections, for which nominations closed this week. Electioneering will start soon.

In a report yesterday to clients, Macquarie Bank forecast that a listed NRMA Insurance would have a market capitalisation of $5.03 billion.

This valuation does not take full account of NRMA's general insurance joint venture launched with Victoria's RACV in May, and any further alliances that may be finalised with other motoring associations in other States, such as with the Queensland RACQ or South Australian SAA.

However, analysts warned that, just like the AMP when it floated in June last year, any float of NRMA was expected to trade at a hefty premium to its book value, at least initially.

"It will raise the benchmark, and probably will have the same problem as the AMP," one analyst said.

The AMP floated at $18.70 and after the first erratic days of trading, the share price settled near $23.

Another analyst said that any demutualisation and public float by the NRMA Insurance arm was likely to draw more investors into the insurance sector, boosting valuations.

The Macquarie Bank report assumed that the NRMA Ltd, the road service arm, would retain its mutual status.

Its $5.03 billion valuation is based on a multiple of 17.5 times NRMA Insurance's forecast year-to-June-2000 net profit after tax of $285 million ($400 million pre-tax).

This forecast is based on press reports and comments from the chief executive of NRMA, Mr Eric Dodd.

In the year to June 1998, NRMA Insurance reported a net profit of $95.4 million.

As part of the demutualisation, Macquarie Bank also assumes that NRMA Ltd will be granted up to a 5 per cent equity interest (or $250 million) in NRMA Insurance "to enhance the security of the Association".

NRMA Ltd would also gain licensing income of about $10 million a year from NRMA Insurance.

The Macquarie Bank analyst who drew up the report, Mr Tony Jackson, said yesterday that this meant the remaining 95 per cent, or $4.8 billion, of NRMA would be attributable to the 1.85 million members of NRMA Ltd, the road-service organisation, and the 1.4 million members of NRMA.

Using this key assumption, the average NRMA member, that is a dual member of NRMA Ltd and NRMA Insurance, would be entitled to shares worth $3,000.

© 1999 Sydney Morning Herald

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