We maintain our BUY call on Syarikat Takaful Malaysia Keluarga (STMK) with a higher fair value of RM4.80/share from RM4.20/share after rolling forward our valuation to FY24. We peg the stock to FY24F P/BV of 2.2x supported by a ROE of 21.8%.
No changes to our neutral 3-star ESG rating.
STMK’s 6M23 earnings were within expectations making up 56% of our forecast and 50.8% of the consensus estimate.
STMK’s 6M23 core earnings of RM186mil rose by 30.1% YoY, supported by higher net investment income which offset a lower takaful service result.
The group’s takaful revenue grew by 17.9% YoY to RM1.3bil. This was contributed by higher contribution income from General Takaful as well as an increase in release of contractual service margin (CSM) by RM12.3mil.
Nevertheless, takaful service results fell by 30% YoY contributed by increased takaful service expenses. This was attributed to higher claims from family takaful (+12.2% YoY to RM600.9mil) and general takaful (+19.7% YoY to RM280.6mil) coupled with higher amortisation of acquisition cash flows (wakalah fees). For general takaful, the increase in claims came from fire and motor class of business.
Net profit expenses from takaful contracts issued rose by RM35mil in 6M23.
2Q23 net profit after tax of RM92mil was subdued (-1.7% QoQ). This was contributed by a marginally lower takaful service results (-3.3% QoQ) from higher net expense from re-takaful contracts held which offset an increase in investment income by RM8mil.
The group’s total investment income climbed by >100%YoY to RM252mil in 6M23. This was largely contributed by the higher profit income from fixed income investments for both the family and general takaful business. Family takaful recorded a lower net fair value losses on financial assets of RM10mil in 6M23 vs. RM66mil in 6M22.
No dividends have been declared in the quarter.
The stock is trading at an attractive FY24 P/BV of 1.7x with a decent dividend yield of 4.7%.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....