KUALA LUMPUR: MIDF Research has downgraded Syarikat Takaful Malaysia Bhd to Neutral following the company’s share price rally but maintained its earnings forecast.
It said the improvement in Takaful Malaysia’s 1HFY15 earnings to RM85.2mil, up 10% on-year was due to higher operating revenue of RM996mil, which rose 16% on-year.
The research house said on Thursday the earnings were still within expectations, accounting for 51% and 49% of its and consensus estimates respectively.
“As the results were within our expectation, we make no changes to our FY15 and FY16 earnings forecasts.
“After the recent share price rally, we view the stock as fully valued. Hence we downgrade our call to Neutral with a revised target price of RM3.42 per share after rolling over our valuation into FY16.
It said the improvement in earnings was contributed by the two main segments.
The topline growth, it said, was generated by strong sales at both the Family Takaful and General Takaful businesses with an increase of 18.6% year-on-year and 9.9% year-on-year respectively, and higher net investment income.
“Despite a fairly competitive General Takaful business environment, we expect sales growth in the General Takaful segment to continue to gain traction as the company will continue with its attractive “15% no-claim cash back” scheme.
“Apart from strong sales, bottom line is enhanced by prudent cost and claims management which has been on a stable trend as evidenced by its stable ratios,” it said.
MIDF Research said the total surplus transfers registered a cumulative decline to RM125.2mil, mainly attributable to a 29% on-year decline in surplus transfers from Family Takaful segment.
The decline, it said, was due to the shift to Wakalah model products and lower realised gains on disposal of investment.
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