KUALA LUMPUR: AmInvestment Research is retaining its Buy on Hong Leong Financial Group (HLFG) with an unchanged fair value of RM17.20/share based on sum-of-parts valuation.
“We continue see the stock as attractive due to: i) it being a cheaper entry for gaining exposure to Hong Leong Bank (HLBB); and ii) its undervalued insurance business. No revision in our earnings estimates, ” it said.
The research house said in 1Q21 (July–Sept 2020) growth of gross premiums has picked up pace modestly year-on-year with improvements in premiums from agents and the bancassurance channel after the partial lockdown (MCO) in March 2020.
In 1HCY20 (Jan–June 2020), key insurance operating subsidiary Hong Leong Assurance’s (HLA) growth in premiums was impacted by the MCO although it still outperformed the industry’s.
Its regular and single premium contracted by 16.4% YoY and 13.5% YoY, smaller than the industry’s decline of 20.8% YoY and 26.3% YoY respectively in 1HCY20.
Meanwhile, agency premium growth registered a decline of 16.8% YoY vs. the industry’s -24.0% YoY.
“We take comfort that the group has not received many requests from the insured to defer premiums up the three months under the Covid-19 relief programme.
“Also, it has not seen many cases requesting for life insurance premiums to be lowered. Hence, the persistency ratio is likely to stay well above 80% with not much of downside risk from the 87.1% in FY20, ” it said.
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