Broker snap: Aviva still cheap despite strong performance, says Nomura

27th Nov 2013 10:40

Nomura has raised its target price for insurance group Aviva from 474p to 489p and maintained a 'buy' rating, saying that the stock remains 'relatively cheap' despite the impressive performance over recent few months.Aviva has risen strongly since the dividend cut at the full-year results in March 7th, with the stock up 37% compared with the STOXX Insurance benchmark which has risen only 20%.Analyst Fahad Changazi said that the group's focus on 'cash flow plus growth' has been "embraced" by the market. Changazi said that progress has been made to address the balance sheet: "1) capital is stronger post disposals; 2) internal leverage has decreased and management remains committed to lowering this further; and 3) also remains committed to bringing down external leverage below 40%."Meanwhile, further operational objectives can be expected alongside the release of the 2013 results in March 2014, he said."There has been significant change at Aviva in the last 18 months or so, while the new Chief Executive Officer, Mark Wilson, is very well regarded by the market. In that sense, one can argue that a lot is baked into the share price already," Changazi said."However, we highlight that despite the strong share price performance, Aviva remains relatively cheap compared to its UK peers. Hence, we believe continued delivery should highlight the inherent strong franchise value at the group, and we expect the stock to re-rate from current levels."The stock was up 1.46% at 431.1p by 10:39 on Wednesday.BC