Although near-term outlook seems clouded by competition and the upcoming 2019 tariff review, the group's leading market position coupled by expanding distribution channels and digital initiatives could sustain performance. BUY with TP at RM4.85 based on a blended FY19E PER/PBV ratio of 15.0x/3.9x which is pegged against its respective 3-year forward averages. Dividend yield of c.4.5% is higher that industry's average of 3.5%. 

TAKAFUL's gross earned contributions (GEC) increased by 20% in both Family and General Takaful segments attributed to gains in market share driven by a solid and growing bancassurance reach, as well as better reception for the group's motor insurance products and Family Takaful offerings (i.e. credit-related, medical). Continuous efforts will be in place to enlarge the group's bancassurance base, but growth from this could see pressure from growing competition. 

To recap, fire insurance classes are due for a review by Bank Negara, to be liberalised in 2019. This is intended to allow fire insurance to be offered at more affordable rates at the expense of insurers, of which this class is also known to be more profitable against others. On other fronts, the group strives to expand its online distribution channels, which could enable better cost efficiency. This should also support the group's principal credit-related business, which has been one of the key growth drivers. 

We believe the group is poised to benefit from increasing early insurance subscription and improved Islamic banking. Budget 2019 intends to increase the adoption of insurance and takaful protection especially among the B40 segment with Great Eastern undertaking to provide a RM2.0b seed funding in realising this exercise. We do not believe this would shrink TAKAFUL's potential market share as the group is not active in this segment. 

Source: Rakuten Research - 7 Nov 2018