KUALA LUMPUR: RHB Research Institute is retaining its Buy call on Syarikat Takaful Keluarga Malaysia (STMB) with a target price of RM8, which is 19% above the last traded price of RM6.70.
It said on Friday the insurer remains one of its top picks in the sector after its 2Q19 results were solid across the board with the Family segment remaining the bright spot.
“We see recent share price weakness due to profit taking as unjustified, and an opportunity to accumulate. Our GGM-derived TP is based on c.4.8 times FY20F P/BV,” it said.
STMB recorded another solid set of results with 24%/61% YoY growth in topline and bottomline.
“Given that 2Q and 3Q are generally the weaker quarters for STMB, we are unperturbed by the sequential moderation in 2Q19 growth (-16% QoQ),” it said.
RHB Research said the group gross earned contribution (GEC) grew c.24% YoY to RM631mil, largely driven by strength in the Family segment, resulting in YTD GEC growth of 32% YoY. Claim ratio improved further by 1.3ppts QoQ to c.41% while management expense (ME) ratio remained steady at 6.9%.
As a result, net profit surged 61% YoY to RM81mil. YTD GEC and net profit accounted for 50%/47% of its forecasts (vs YTD18: 44%/41%) and 49%/48% of Street’s.
“Looking at the Operator’s income statement, net profit soared 58% YoY, underpinned by c.29% YoY growth in wakalah fee income and c.147% jump in Family takaful surplus transfer.
“Family segment remains the bright spot. 2Q19 GEC grew c.33% YoY to RM465m, mainly attributable to higher sales in credit-related products. Claim ratio improved c.2ppts QoQ to c.41% but was partially offset by a mild decline in wakalah fee rate of c.-4ppts QoQ (2Q19: c.34%).
“Nevertheless, Family’s bottom line (surplus attributable to takaful operator/participants) still saw a respectable 156% YoY increase,” it said.
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