One of the most interesting sales to emerge on the 6th August 2015 is the release of Aviva plc (LON:AV) stock from Deutsche Bank. Although Deutsche Bank has considerably reduced its Aviva share price in anticipation of the 6th August results, it is insistent that there is nothing to deter investors from purchasing shares at their current values.
Downgrading to a predicted EPS is largely the result of a much higher exchange rate for the British pound. Deutsche Bank’s representative, Oliver Steel, explains the decision to introduce a reduction of 3% to 360p in the base target price, followed by a 3% reduced EPS was the result of predictions from 2016e to 2017e which served as a reflection of a weak FX.
Bearing this in mind, would be investors need to realise why this particular stock release is being put forward as a recommended purchase. Deutsche Bank’s own research suggests the share release has the most reduced 2016e multiple of a variety of UK life assurers or composites and predicts a substantial recovery for Aviva as early as 2017 to 2018.
As one of the slow-burners of market perceptions, Deutsch Bank can apparently detect very little danger in purchasing at the present level, as any positive alteration to such a low rating could be adequate to promote upside.
At the 1H, there could be an opportunity for this, so the argument for buying wtih regard to long-term benefits is compelling. Capital releases for 2016e to 2017e of c.5% is a 20% reduction compared to less expensive composites. Aviva could provide an improved underlying yield in twelve months and even achieve a >20% increased performance over the next two to three years.