Period 3Q12/9M12
Actual vs. Expectations
The 9M12 PAT of
RM16.5m was within our expectation (49%) and the management’s guidance. We
believe management will be able to achieve at least RM15m PAT in the 4Q to
reach our full year estimate of RM33.6m.
Dividends No
dividend was declared.
Key Results Highlights
On a QoQ basis, the group’s 3QFY12 PAT was up significantly
to RM14.4m. The increase was mainly driven by the normalisation of few one-off items
vs. 2Q, which saw RM20.8m impairment loss arising from the commutation of a reinsurance
contract and the increase in share losses of RM7.3m incurred by MMIP.
YTD, P&O registered a 4.6% YoY growth rate in the
gross written premium to RM413.0m, driven by the motor cycle insurance. The
mid-single digit revenue growth was within our expectation as well as the
management’s guidance as P&O already have a dominant market share in the motorcycle
insurance business.
Overall, we think
this is a good set of results and is on track to achieve our RM33.6m net profit
forecast.
Outlook We
believe that M&A activities would act as rerating catalysts for P&O’s
share price. The media had reported that South African’s largest financial services
provider, Sanlam, is eyeing a substantial stake of up to 49% in Pacific and
Orient Insurance (“POI”), a 100%-owned subsidiary of P&O. Further
developments from here could drive up P&O’s valuation over the next 6-12
months based on the recent acquisition valuation parameters of M&A
transactions, in our view.
Change to Forecasts
No changes in our
forecasts.
Rating Maintain OUTPERFORM
P&O is trading at
just 4.6x its core FY13 earnings and at just 1.1x its FY13 book value. There
could be upside to our profit forecasts as Hanover RE could potentially return
its excess profits to P&O starting from 2013 as part of its previous quota share
arrangement.
Valuation Maintain our Target Price of RM1.60, valuing
the group at an undemanding FY13 EPS of 6.0x.
Risks Unexpected MMIP losses could erode earnings.
Source: Kenanga
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