BUY maintained

Positive earnings momentum continued for the group, driven by higher revenue and investment income across most divisions. Our forecasts are maintained, as is our BUY call and Gordon Growth Model (GGM)-derived TP of MYR1.40 (COE: 9.3%, ROE: 6%, LT growth: 3.5%).

Above expectations

MNRB’s 2QFY24 net profit of MYR41.6m (+209% YoY, -40% QoQ) took 1HFY24 net profit to MYR111m (vs a net loss of MYR9.7m in 1HFY23) – above expectations, at 72% of our full-year forecast. That the results were weaker QoQ was largely on account of lower investment income, which had been anticipated. Given the volatility of investment income, we maintain our earnings forecasts, in anticipation of lower gains in the coming quarters, given that domestic interest rates have peaked, in our view.

A turnaround for the reinsurance business

The reinsurance business turned in a better net profit of MYR85m in 1HFY24 versus MYR14m in 1HFY23 due to improved investment income and normalized claims, in the absence of claims relating to the Great Malaysian Flood (end-2021). The retakaful business saw its 1HFY24 net profit rise 27% YoY due to higher investment income and lower management expenses.

Improved performance from general and family

The general takaful business saw its revenue jump 36% YoY in 1HFY24 due to robust motor premiums and higher agency sales. Its net profit surged 142% YoY as a result of the higher revenue as well as better investment income and wakalah fees. The family takaful business saw revenue decline 9% YoY due to lower revenue from the bancatakaful channel, but this division turned in a profit in 1HFY24 of MYR8m versus a loss of MYR2m in 1HFY23, due to higher investment income.

Source: Maybank Research - 21 Nov 2023