PETALING JAYA: Further double-digit earnings growth is possible for Islamic insurer Syarikat Takaful Malaysia Keluarga Bhd (STMB), according to RHB Research.
The research house is projecting earnings growth of 17% and 13% for the financial year 2019-2020 (FY19-FY20) ending Dec 31 for STMK.
“This should be mainly driven by the family segment’s earnings growth of 34% and 14% for FY19-FY20 and 12% and 9% growth in wakalah fee income,” RHB Research said.
“For the general segment, we chose a rather conservative approach in our earnings forecasts, where we expect segmental losses to persist. We are not overly concerned by it as our segmental breakdown and sensitivity analysis shows that the losses are still manageable,” the research house added.
RHB Research said it still likes STMB on the overall low insurance penetration in Malaysia, while the company is exposed to the growth in takaful that is outpacing the industry’s.
It said STMB has a strong bancatakaful channel and innovation in digitalising the business.
RHB Research noted that the stock is trading at four times price to book value after the more than 60% rally in stock price in the year-to-date period.
STMB added to its recent gains by closing 6 sen up yesterday at RM6.07 with nearly 1.8 million shares changing hands.
The research house maintained its buy call on the counter with a new increased target price of RM7 which is derived using the Gordon Growth Model (GGM).
Our GGM-derived target price is based on a circa 4.4 times FY20 price to book value that which is slightly above +1 standard deviation from historical mean, but is justified by the rising return on equity.
“We admit that, given the stellar share price performance, there could be some profit-taking in the near term. That said, we believe the stock price remains on an upward trajectory over the medium-to-longer term on the above mentioned thesis,” it said.
RHB Research noted that low insurance penetration and a rising middle class should be the structural drivers for future insurance demand in Malaysia.