I have been stop updating this blog for some times because I was too busy for my full time job, as a financial accountant. Further, when the market valuation is trending up, it becomes harder to find any undervalued stock. By the way,  if we were the market efficient hypothesis believer, no “undervalued” or “overvalued” stock could be found indeed.

Recently I am researching this company, Takaful, stock code 6139, listed in the main market of Bursa Malaysia. As the time of writing this blog, I hold this company shares in my portfolio.

Let’s talk about some good things about this company first. As Malaysia is a majority Muslim population country, this is a main growth driver for the Islamic insurance industry. In FY2017, the company achieved both higher PBT margin and net profit margin. Higher profit margin was due to the higher Wakalah fee incomes, lower net benefit paid and claims. Currently my valuation to this company is RM 4.09, based on the PE model 16.1x. See exhibit 1 below.

My valuation is very conservative and I believe FY2018 is a challenging year to the company. The reasons are following:

1. The net earned contributions in FY2017 was grew merely 2.4%.
2. The benefits paid and claims is highly uncertainty, it may be higher or lower in year 2018.
3. Malaysia interest rate went up 25 bps. This means those debt securities in the company portfolio probably revalued down.

Anyway, in my opinion, the disposal of the Indonesia subsidiary, named PT Asuransi Takaful Umum will have a positive impact on the net profit in 2018.

As a final comment, I hope I got a crystal ball so I can know what will happen in the next seconds. However, the market is so unpredictable to me.

https://streetanalystblog.wordpress.com/2018/01/29/takaful-a-challenging-year-2018/