Now, It's The $5.1bn Nrma

Sydney Morning Herald

Monday March 13, 2000

By ANTHONY HUGHES

Broking firm Warburg Dillon Read has valued NRMA at $5.1 billion, 14 per cent higher than the valuation laid down by independent experts for the motoring and financial services group's sharemarket listing.

Warburg insurance analyst Mr Frank Costigan estimated NRMA to be worth $3.42 a share, well ahead of Ernst & Young Corporate Finance's valuation of $2.60 to $3 a share contained in the information memorandum.

The report also estimates NRMA could release close to $1 billion for acquisitions if the group more aggressively managed its capital base.

NRMA members will vote on April 19 to demutualise the NRMA's insurance arm and list on the Australian Stock Exchange in the second half of the year.

Mr Costigan bases his valuation on a year to June 2000 net profit forecast of $343 million, up from $276 million.

Based on the Warburg valuation, the average member would receive shares worth $2,800, based on the assumption the average member had two insurance policies and held membership for a decade.

Mr Costigan said in a report that the NRMA, as Australia's largest general insurer, would benefit from unrivalled economies of scale and strong loyalties from its large road member base.

He also cites NRMA targets to 2003 to double general insurance revenue, triple funds under management and achieve a pre-tax return of at least 18 per cent to underpin the valuation.

``We believe these targets can be achieved and that there is scope for upside above these targets," the report says.

Higher profits would flow from acquisitions in the general insurance arena and increased penetration of its customer base.

Macquarie Equities last year valued NRMA at around $5 billion, but with heightened speculation of more mergers and acquisitions in the financial services sector, NRMA may attract an even higher premium as a takeover target.

The fine details

* Warburg values NRMA at $5.1bn or $3.42 a share, above official range of $2.60 to $3

* implies price/earnings ratio of 14.8 times year 2000 forecast earnings of $343 million, up 22pc

* general insurance and financial services worth $4.38m, health insurance and reinsurance $195m, other assets $520m

* says NRMA revenue and return on equity targets are achievable

© 2000 Sydney Morning Herald

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