Investment Highlights

• We maintain BUY on Syarikat Takaful Malaysia Keluarga (STMK) with a revised fair value of RM4.40/share (from RM4.80/share previously), pegging the stock to a lower FY24F P/BV of 1.9x (previously: 2.2x) supported by a ROE of 18.9%. No changes to our neutral 3-star ESG rating.

• FY23 net profit was within expectation, coming in 5% below both of our estimate and consensus’. Our FY24F/25F earnings are tweaked by -8.6%/-16.2% to reflect changes to takaful revenue estimates and higher projection of net expense from retakaful contracts.

• STMK’s FY23 core earnings of RM347mil rose by 22.6% YoY, driven largely by higher net investment income which offset a lower takaful service result and higher net takaful finance expenses.

• Takaful service results slipped 15.2% YoY to RM175mil in FY23, contributed by the increase in takaful service expenses and increase in net expense from retakaful contract. Takaful service expenses rose due to increase in acquisition expense for wakalah fees. Meanwhile, takaful revenue for FY23 increased by 14.5% YoY to RM2.9bil, contributed by higher revenue earned for services under family takaful and increase in contributions from fire and motor class of business under general takaful.

• On QoQ basis, 4Q23 net profit after tax of RM70mil declined by 22.8%. Takaful revenue jumped 54.7% QoQ to RM990mil. Nevertheless, this was dampened by increase in takaful service expense leading to a decline in takaful service result for the quarter. Also, it was due to a lower investment income as a result of a decrease in net realised and fair value gains on financial assets as well as higher net impairment losses on financial instrument.

• As at end-FY23, the group’s CSM stood at RM1.2bil, a decline of RM27mil YTD. This was mainly attributed to RM240mil releases in CSM and RM61mil adjustment from changes in estimates. Year-to-date, the value of new business value recognised was RM234mil.

• The increase in the group’s net reinsurance expense to RM197mil in FY23 vs.

• The group’s total investment income climbed 35.9% YoY to RM530mil in FY23. This was largely contributed by higher profit income from fixed income investments and a lower fair value loss for the family takaful business. Additionally, the general takaful business recorded a higher profit income from fixed income securities.

• Except the dividend of 14 sen/share declared on 29 Dec 2023 and paid on 2nd Feb 2024, no other dividends have been proposed.

• The stock is trading at an attractive FY24F P/BV of 1.7x with a decent dividend yield of 4%.

Source: AmInvest Research - 27 Feb 2024