Highlights

Affin Hwang Capital Research Highlights

Author: kltrader   |   Latest post: Tue, 1 Dec 2020, 8:38 AM

 

LPI Capital - Profits Held Up In 2Q20

Author:   |    Publish date:


  • LPI’s 2Q20 net profit of RM77.4m (+4.7% yoy; -0.7% qoq) was within our expectations. 1H20 results accounted for 56% of our 2020 estimate. An interim DPS of 28 sen was proposed (2Q19: 27 sen).
  • For 1H20, LPI saw underwriting profit up 5.5% yoy, as net earned premium continued to hold up yoy while commission expenses declined. Nonetheless, we expect weaker profits in 2H20, with expectations of rising net claims.
  • Maintain HOLD on LPI, with an unchanged PT of RM15.00, based on a P/BV target multiple of 3.0x on 2021E BVPS. Our earnings forecasts are unchanged.

LPI’s 2Q20 net profit held up qoq, 1H20 net profit up marginally

LPI Capital reported a 2Q20 net profit of RM77.4m (+4.7 yoy; -0.7% qoq), as the quarter was underpinned by better investment income (+27% yoy) while net claims rose by a marginal 1.2% yoy and 4.5% qoq (due to ‘low claims’ months in April and May, but normalized in June). The impact of the MCO was reflected at LPI’s top line, as we note that 2Q20 gross written premium (GWP) was down 7% yoy and 30% qoq. The impact however was mitigated by lower provision for technical reserves (for unearned premium reserves) in 2Q20, which resulted in higher net earned premium of +6% qoq and flat yoy. Underwriting profit for 2Q20 rose 4.5% qoq while for 1H20, was up 5.5% yoy driven by lower commission expenses while net claims incurred was flat. 1H20 net profit meanwhile was up by a marginal 2.8% yoy.

A weaker 2H20, to be driven by higher claims and lower investment gains

We are of the view that LPI may continue to face challenges in 2H20, as net claims incurred is expected to continue rising, driven by the motor and miscellaneous (primarily employee health benefits) segments as the economy reopens post-MCO (from June onwards). Meanwhile, with lower market volatility in 2H20, we expect less investment fair-value gains to prop up its bottom-line profits.

Maintain HOLD, Price Target unchaged at RM15.00

We maintain our HOLD rating on LPI, with a 12-month TP of RM15.00 based on a target P/BV multiple of 3.0x on 2021E BVPS of RM4.98. We maintain our 2020-22E earnings based on these assumptions: i) GWP growth at -7.0% for 2020E and flat for 2021E; and ii) net claims ratio at 44%. We foresee 2020 net profit to decline by 16% yoy and rebound 12.4% yoy in 2021E. LPI’s robust capital adequacy ratio (CAR) in excess of 400% reflects its strong underwriting capacity to take on more risks and withsthand potential shocks. Upside/downside risks: stronger/weaker GDP; lower/higher claims ratio.

Source: Affin Hwang Research - 18 Aug 2020

 

Share this
Labels: LPI

Related Stocks

Chart Stock Name Last Change Volume 
LPI 13.04 +0.06 (0.46%) 59,300 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Perform Technical & Fundamental Analysis on Stocks
MQ Affiliate
Earn rewards by referring your friends
 
 

395  610  596  818 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 YONGTAI 0.355+0.06 
 MTRONIC 0.14+0.02 
 HWGB 0.96+0.115 
 MTRONIC-WA 0.09+0.015 
 SAPNRG 0.125+0.005 
 PHB 0.035+0.005 
 EAH 0.03-0.005 
 INIX 0.345+0.08 
 KNM 0.225+0.015 
 KANGER 0.1750.00 

FEATURED POSTS

1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!

TOP ARTICLES

1. Vivocom’s V-Shape Recovery still intact, and a sharp rally upwards to RM1.22/RM1.48/RM2.20 can take off anytime See Jovin
2. Vivocom’s Steady and Calm Rally to RM1.12 Today. Will It Surge to Break RM1.22 Soon? See Jovin
3. 商业高峰(PUNCAK,6807)股价低于产值 。。。。 jjjmoney
4. AN UNDISCOVERED GEM UPDATE: NEW HOT HOT SELLING PRODUCT FLYING OFF THE SHELVES !! Chongkh888
5. Shipping out VACCINE timely? Forwarders see their cargo bumped as vaccine shipments take off. gloveharicut
6. TOPGLOV hints HR ministry’s action does not match stated stand gloveharicut
7. Vivocom’s V-Shape Recovery still intact. Rally still ongoing in a calm and steady stair stepped ascension. See Jovin
8. CIMB Retain Add on TOPGLOV; awaiting further updates on Act 446 gloveharicut
PARTNERS & BROKERS