Background

Kurnia Asia Bhd ('Kurasia') is a holding company which wholly owns Kurnia Insurans (Malaysia) Berhad - the largest general insurer in Malaysia.

Recent Financial results

Kurasia's financial performance has improved slowly over the past 6-7 quarters after taking a huge loss of RM303 million in Qe30/6/2008. That net loss was mainly due to a 23.4%-increase y-o-y in Claims Expenses from RM877 million for FY2007 to RM1.082 billion for FY2008; a 11.1%-increase y-o-y in Management Expenses from RM212 million for FY2007 to RM235 billion for FY2008; and, a 48.9%-drop y-o-y in Investment income from RM182 million for FY2007 to RM93 million for FY2008. It is hearty to note that the increased Claims Expenses was due to higher claims provision in compliance with more stringent reserving requirement under RBC framework.


Table 1: Kurasia's last 8 quarterly results


Table 2: Kurasia's Huge Loss of RM303 million in QE30/6/2008 explained


Chart 1: Kurasia's 8 quarterly results

Valuation

Kurasia (closed at RM0.56 today) is now trading at a PER of 7.6 times (based on last 4 quarters' EPS of 7.36 sen). At this PER multiple, Kurasia is deemed inexpensive.

Technical Outlook

From the chart below, we can see that Kurasia has recently tested in its medium-term downtrend line support at RM0.50. The strong rebound today (with gain of 4 sen) may indicate that this stock is likely to continue with its prior uptrend.


Chart 2: Kurasia's daily chart as at May 11, 2010 (Source: Tradesignum)

Conclusion

Based on steadier financial performance, undemanding valuation & good technical outlook, I believe Kurasia could be a good stock for medium-term investment.