Hold maintained

While MNRB’s 1QFY23 results were below expectations, with the group swinging to a loss position, we maintain our forecasts on anticipation of improved investment income and possibly mark-to-market investment gains in the coming quarters. We maintain our forecasts and HOLD, with an unchanged GGM-derived TP of MYR1.10.

Swung to a loss position

MNRB reported a net loss of MYR13m in 1QFY23 versus a net profit of MYR47m in 1QFY22. The results were below expectations. The reinsurance business swung to a pretax loss of MYR15.9m in 1QFY23 from a profit of MYR23m in 1QFY22. This was attributed to fair value losses on investments (due to rising bond yields), higher claims (particularly against the Dec 2021 Malaysian flood) and foreign currency transaction losses.

Lower YoY earnings from Family Takaful

Family Takaful reported revenue growth of 3.6% YoY due to higher gross contribution from group credit and mortgage takaful products. Nevertheless, pretax profit declined 54% YoY due to fair value losses on investments during the quarter, as bond yields continued to rise. Positively, the General Takaful division’s revenue jumped 36% YoY, with growth across all distribution channels. Its pretax profit rose 14% YoY as a result.

Forecasts maintained

Our forecasts are maintained in anticipation of better investment income and possibly mark-to-market investment gains in the coming quarters. Our Gordon Growth Model (GGM)-derived target price of MYR1.10 implies a prospective CY23 PER of 6.1x, which would be in-line with its long-term one-year forward rolling PER mean.

Source: Maybank Research - 1 Sep 2022