2HFY23 likely better, uncertainty in FY24

Our FY23 earnings forecasts factor in an expected improvement in 2HFY23 for MNRB, stemming from better investment performance, lower claims at Malaysian Re and faster topline growth at the family takaful division. There is, at this stage, some uncertainty surrounding the impact of MFRS17 on the group’s financial performance in FY24. We maintain a HOLD call with an unchanged Gordon Growth Model (GGM)-derived TP of MYR0.90.

Expect improved 2HFY23 performance

While MNRB’s financial performance in 1HFY23 was weak, we expect improved earnings in 2HFY23 on the back of various factors such as a) a better investment performance across the group on the back of lower bond yields, b) a better claims experience at Malaysian Re and c) higher topline growth at the Family Takaful division. Our forecasts are maintained, having already factored in expectations of better earnings in 2HFY23.

Earnings uncertainty in FY24

There is, at present, some uncertainty to our FY24 earnings forecast. MFRS17 will be implemented from 1 Apr 2023 and this could result in lower contributions, particularly from Family Takaful, though this could possibly be offset by higher investment income if bond yields soften, in our view. We await further guidance from management on the potential impact.

TP of MYR0.90 maintained

Our Gordon Growth Model (GGM)–derived target price of MYR0.90 is maintained. The key parameters are a) a risk-free rate of 4.5%, cost of equity of 9.2%, CY23E ROE of 4.7% and a LT earnings CAGR of 3%.

Source: Maybank Research - 17 Jan 2023