What’s New

MAY to list Etiqa? It was reported in StarBiz over the weekend that MAY is considering a spinoff of its insurance arm, Etiqa. This is not the first time such an action is believed to have been contemplated by MAY. MAY owns 69% of Maybank Ageas Holdings, of which its main operating entities are Etiqa Insurance and Etiqa Takaful. The remaining 31% is owned by Ageas Insurance International, an international insurance Group with presence across Asia and Europe. Insurance and takaful contributes c.10% to MAY’s PBT

Well-balanced portfolio and extensive distribution network. The Etiqa group offers life and general insurance as well as takaful products, in Malaysia, Singapore and the Philippines. The revenue mix (by gross premium) is 51:49 for life and general insurance and 56:44 for conventional and takaful. Etiqa has a comprehensive distribution network, with agency force of over 10,000 agents, 28 branches throughout Malaysia and a wide bancassurance distribution network thanks to MAY’s strong branch presence.

Etiqa could command approximately 1.5x BV, in our view, given its strong market share in both life and general business. Based on latest available data, Etiqa holds the top position in General Insurance and Takaful at 13% market share, and 4th in Life/Family at 9% market share of new business premium. The closest comparison to Etiqa is Allianz Malaysia (ALLZ MK), which also has strong market share in both life and general insurance. Allianz Malaysia is trading at about 1.2x BV. The most recent M&A transaction for an insurer with a composite license is MCIS insurance, which fetched a valuation of 1.7x BV.

Maintain HOLD and TP of RM8.00. While no official announcement has been made yet, we view this move potentially positive as it could unlock shareholder value and lift capital ratios of MAY. We keep earnings and TP unchanged. Assuming this corporate action does not take place, we have a TP of RM8.00 (based on 11% ROE, 4% growth and 10.1% cost of equity) which implies 1.2x FY17 BV. Its high dividend yield of 6-7% remains the stock’s key appeal

Source: Alliance Research - 17 Apr 2017