Earnings and TP lowered

Although MNRB returned to the black, its 2QFY23 results were below expectations, mainly on account of higher claims during the quarter. Our FY23-25E earnings are cut by 9-35% and our TP is lowered to MYR0.90 from MYR1.10. We maintain a HOLD on the stock.

Below our expectations

MNRB reported a net profit of MYR14m in 2QFY23 (-64% YoY) versus a loss of MYR13m in 1QFY23, resulting in a cumulative 6MFY23 net profit of just MYR0.7m (-99% YoY) – just 1% of our full-year forecast. While other revenue recovered QoQ from a loss of MYR48m in 1QFY23 to an income of MYR106m in 2QFY23, this was offset by a 40% QoQ jump in net claims. Positively though, the group returned to a net profit of MYR14m in 2QFY23 from a net loss of MYR13m in 1QFY23 (caused mainly by higher marked-to-market investment losses).

Higher claims and expenses

The general reinsurance division saw its net earned premiums rise 17% YoY but this was offset by lower investment income, as well as higher claims and expenses. The general takaful division saw net earned contributions rise 43% YoY but similarly, its claims and other expenses jumped 50% and 49% YoY respectively.

TP cut to MYR0.90

Factoring in higher claims and expenses moving forward as well as lower investment income, our FY23/24/25E earnings are cut by 35%/9%/10% respectively. Our Gordon Growth Model (GGM)-derived target price is correspondingly cut to MYR0.90 from MYR1.10. This would imply a prospective CY23E PER of 5.8x, about in-line with its long-term one-year forward rolling PER mean of 6.1x.

Source: Maybank Research - 29 Nov 2022