• One of the top reinsurers in ASEAN. MNRB was set up in 1972 to limit the out flow of reinsurance premiums overseas. The company commenced operations on 9 February 1973. The MNRB Group comprises leading wholesale providers of reinsurance and retakaful as well as a takaful operator. Its reinsurance subsidiary stands tall among the top reinsurers in the region, writing lines of general businesses locally and abroad. In Malaysia, its takaful operator vies among the leaders in the provision of Islamic financial protection services based on the takaful system.

• Share prices boosted by proposed bonus issue and a turnaround in 1QFY17 results. MNRB’s share prices tumbled to a 52-week low of RM2.40 (15 Jul ) following a sluggish 4QFY16 results. However, share prices staged a strong relief rally to a high of RM3.15 (30 Aug) before ending at RM3.10 yesterday, spurred by the proposed 1:2 bonus issue (announced on 10 Aug and to be completed in 4Q16) and a turnaround in 1QFY17 results (released on 24 Aug). We still expect share prices to get another leg up upon the announcement of bonus issue entitlement date after holding the EGM (to be determined later).

• Poised for further upside amid bullish LT downtrend line breakout. At RM3.10, MNRB’s latest P/B of 0.48x is inexpensive as it is trading at 17% discount against its 5-year average of 0.58x. Short to medium term trend for the stock could have turned up after prices broke out of its downtrend line from the RM4.18 high (12 June 2015). The stock is currently building its base above the 200-day SMA (now at RM2.90). As the MACD is on the way to stage a golden cross and both RSI and slow stochastic indicators are on rising trend, we expect share prices to break RM3.15 soon and march further towards RM3.28 (50% FR).

• A decisive break above RM3.28 will li ft prices towards RM3.49 (61.8% FR) and our LT target at RM3.57 (52-week high). Major supports are near RM3.02 (10-d SMA) and RM2.93 (Lower Bollinger band). Cut loss at RM2.90.

Source: Hong Leong Investment Bank Research - 23 Sep 2016