INVESTMENT HIGHLIGHTS

• STMB’s launched a new digital platform

• Few head agreements were signed, on new digital distribution

• Maintain earnings forecast for FY18 and FY19

• We maintain our BUY stance with TP of RM4.65 per share

Inking partnership with digital platform provider. The group launched its new digital platform, “Click for Cover”, on 2 March 2018. Following the launch, few agreements/ memorandum were inked between Syarikat Takaful and other parties namely Fusionex, Lembaga Tabung Haji and Bank Islam.

Looking at the prospect. The main highlight was the formation of partnership between Syarikat Takaful and Fusionex, an established IT software group that specializes in Analystics and Big Data. Fusionex is expected to provide seamless customer experience for purchasing Syarikat Takaful products online. We view this latest development as positive as it could strengthen the digital footprint of the group in the takaful market. We also view that collaboration formed with Tabung Haji and Bank Islam, as complimentary to its digitalization strategy as it forms a stronger distribution channels for its takaful products offered in the “Click to Cover” platform. Via the platform, the takaful provider will be able to introduce online Takaful products to depositors of LTH and customers of BIMB.

Our view. We believe the impact of these developments to be positive for the group, enhancing its capability to increase the group’s overall takaful contribution. Moving forward, as the new online channel reaches its maturity; we opine that underwriting margin to see improvement stemming from lower management expenses in the medium term. Also, we opine claim expenses in the future to stabilize, stemming from better risk-matching exercises in the general segment. Additionally, online platform will widen takaful products reach to consumers, leveraging on the high penetration rate of online presence in the local market.

Impact to earnings. No immediate impact to earnings, considering that the developments are still at nascent stage.

Valuation and recommendation. Maintain BUY. Given our positive view on the partnership agreements signed, we maintain our BUY call on Syarikat Takaful with TP of RM4.65. We believe STMB is well positioned to take advantage of the underserved consumer market, which is mostly represented by demographic population that favours Islamic products and takaful protection. Recall that Malaysia has low penetration of life/takaful insurance subscription issue circa 56.2% (vs 75% target by 2020). With greater intensity of digitalization adopted in the group’s operation, it will enable STMB to boost its core earnings reaching out to targeted market. As the only listed pure takaful player on Bursa, we view that the recent retracement of its share price makes the stock an attractive investment proposition.

Source: MIDF Research - 5 Mar 2018