Listed since 1996, Syarikat Takaful Malaysia Keluarga Berhad (TAKAFUL) has been one of the leading Takaful operators in Malaysia. It runs both the family and general takaful business along with a small overseas operation in Indonesia.

After sliding 21% from a high of RM5.08 (8 Mar) to RM 4.00 on 18 Oct, TAKAFUL is currently trading at an undemanding 8.8x FY22 P/E (34% and 18% discount against its 5-years average of 13.5x and peers’ average of 10.7x, respectively), underpinned by a steady 4.3% FY21-23 EPS CAGR and 3%-5.6% FY21-22 DYs. TAKAFUL’s stock performance had been lackluster, possibly because of fund’s portfolio rebalancing activities due to BIMB’s corporate exercise. We believe the stock price is likely to catch up when the portfolio rebalancing activities subside. Hence, recent weakness in share prices provides a great opportunity to accumulate given TAKAFUL long-term prospects remained intact.

While we expect 3QFY21 earnings to be weaker due to lower gross earned contribution amid recent lockdown, we nonetheless reckon the group’s online sales portal (OSP) that had gained traction since 1H21 would serve as a cushion to limit the impact. We expect the overall business to pick up again in 4QFY21 (similar trend to 2020’s movement restrictions) as economic reopening gains traction. Going forward, the group will continue with its strategic initiatives to strengthen its business resilience and adjust its operating models to cater into a very different market and dynamic operating landscape.

Technically, TAKAFUL is grossly oversold and building a sound base at RM 3.95- 4.05 territory. Any weakness from the current price toward key supports of RM3.95 provides a good opportunity to accumulate. A strong breakout above RM 4.22 (0.236 FR) will spur the price higher to RM 4.40-4.52 territory. Cut lost at RM3.87.

Source: Hong Leong Investment Bank Research - 20 Oct 2021