LPI presents buying opportunity, says Kenanga

  • Analyst Reports
  • Tuesday, 04 Feb 2020

KUALA LUMPUR: Investors should take advantage of the weak share prices of LPI Capital Bhd following the release of its FY19 earnings that came within expectations, says Kenanga research.

The research house upgraded its call to outperform from market perform previously, and reduced its target price on the stock slightly to RM15.90 from RM16 post result model updates to book value.

"We maintain our 3.0x FY20E PBV valuation (close to the stock’s 3-year forward average), a level which we believe trading appetite is likely to support as the stock has firm backing from Public Bank.

"The stability it offers and attractive yields of c.5%, appeals to investors seeking to ride through the current turbulent market environment," it said.

In its recent FY19 results, LPI posted a net profit of RM322.4mil which came to 101% and 100% of Kenanga's and consensus estimates respectively.

A final dividend of 43 sen brought full-year payment to 70 sen, which came close to Kenanga's anticipated 72 sen or 95% payout.

According to Kenanga, LPI's fire insurance products account for about 40% of GEP and about 65% of underwriting surplus before management expenses.

The segment continues to thrive owing to Public Bank's growing mortgage business while it could continue to be on safe grounds given Bank Negara's earlier stance to defer its detariffication plans for further studies on the matter.

Kenanga also regards LPI as having a more sustainable business model due to its tightly held and dependent holding interests, despite other insurance segments being more susceptible to volatile market conditions.
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