Syarikat Takaful Malaysia Keluarga Bhd’s (Takaful Malaysia) 9MHFY23 net profit, up 28% YoY came within expectations, after the introduction of Malaysian Financial Reporting Standard (MFRS) 17 in the country.
Effective 1 Jan 2023, the group has applied the new MFRS 17-Insurance Contracts standard to replace MFRS 4 which uniformly distributes revenue recognition of takaful and re-takaful contracts but also changes accounting presentations, such as the removal of ‘net earned premiums’ for ‘takaful service result’.
Kenanga Research, in its Results Note today (Nov 24) said the group should continue to deliver growth fuelled by its effective Bancatakaful connections as well as widening products range and channels.
“Meanwhile, it may not be overly strained by the de-tariffication of fire class insurance given its relatively smaller exposure as compared to its general insurance peers,” it said.
Therefore, Kenanga maintains its OUTPERFORM call and a higher PBV TP of RM4.10. based on an unchanged 1.9x FY24F PBV, at a 30% discount against a leading peer.
“Post-results, we tweak our FY23F/FY24F earnings by -2% and +1% from model updates to include 3QFY23. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us,” it said.
“We believe Takaful Malaysia offers a distinctive opportunity to tap into the growing shariah market. Meanwhile, its industry leading ROEs could act as buffers against possibly intensifying market conditions.
“Additionally, its relatively lower exposure to de-tariffication sensitive portfolios could be a point of comfort for investors,” it added.
The risks to Kenanga’s call include lower premium underwritten, higher-than-expected claims incurred, higher-than-expected management expense ratio, and further wave of pandemic.
The research house said 9MFY23 net profit of RM276.8 million made up 75% of our full-year forecast and 77% of consensus full-year estimates.
Overall, 9MFY23 net profit reported at RM276.8 million, up by 28% and its takaful revenue rose by 21% on stronger demand
from both Family (from an increase in coverage) and General Takaful products (from greater fire and motor class business), year-on-year.
“We continue to expect the group to see continued support with its Bancatakaful portfolio leading the charge for its credit-related products.
“On the flipside, the group is likely to be less susceptible to pressures seen in the fire class insurance space following further price liberalisation introduced in 2HFY23,” Kenanga added.
