KUALA LUMPUR: CIMB Equities Research is retaining its Add call for Maybank with a dividend discount model (DDM) target price of RM10.80, which is an upside of its last traded price of RM8.93.
It said on Wednesday the target price supports our investment theme of regional expansion of the insurance and Islamic banking businesses.
“Other potential re-rating catalysts for our unchanged Add call on Maybank are 1) recovery in the contributions from Indonesia and 2) the benefits from the regionalisation of its operations. Our EPS forecasts and DDM-based target price are intact,” it said.
On Tuesday, Maybank held an Investor Day for insurance and takaful business, which was hosted by its group chief financial officer, Datuk Mohamed Rafique Merican and group head, insurance and takaful, Kamaludin Ahmad.
CIMB Research said the event provided analysts and fund managers an indepth look into Maybank’s insurance/takaful businesses (housed under Etiqa). The key highlights were Etiqa’s aspirations and drive for further regional expansion.
Etiqa has exposure to Malaysia, Singapore and the Philippines Etiqa is a comprehensive insurer with (life and non-life) insurance and (family and general) takaful businesses. Through its subsidiaries, it has operations in Malaysia, Singapore and the Philippines.
Effectively, Maybank owns about 69% of all the entities of Etiqa. In 2015, Etiqa underwrote a total gross premium of RM5.1bn (+2.4% vs. FY14) and recorded a PBT of RM604m (-21.4% yoy). In Malaysia, it had 2015 market share of 12.9% in general insurance/takaful segment and 9% in life/family takaful segment.
“The positive take from the event is the group’s continuous push for regional expansion of its insurance business, primarily in the Asean region.
“After entering Singapore’s and the Philippines’ markets, the group will focus on organic growth in these countries. In the longer term, Maybank aims to enter the Indonesian market for its insurance business, with plans to capitalise on Maybank Indonesia’s network for growth.
“In FY15, the insurance unit of Maybank contributed a sizable 20.9% of the group’s total operating revenue. However, it only made up 7.3% of the group’s PBT in FY15.
“We think the earnings contributions from the insurance business would increase to high single digits in the longer term, as we envisage stronger growth in the insurance business (compared to banking) resulting from the push for regional expansion. This would help to increase the group’s non-interest income ratio and diversify its income stream,” said CIMB Research.