Syarikat Takaful Malaysia (STMB)’s 9MFY12 core net profit was within expectations, accounting for 68.3% of our full-year estimates as we expect a stronger 4Q. Wakalah fees continued to gain traction, especially with contributions from its general takaful operations. However, earnings were dragged down by the uptick in expenses arising from higher personnel costs and high tax expenses along with some non-deductible operating expenses. Nevertheless, as we believe these expenses will normalize, the group should record strong results for its fourth quarter. We make no changes to our forecast. Maintain BUY, at RM8.00 FV.
Top-line contribution still sturdy. STMB's 9MFY12 core net profit surged 45.0% y-o-y, boosted by significantly higher wakalah fees (+105.0% y-o-y) and a higher transfer surplus from its family takaful fund (+56.9% y-o-y). The general takaful fund experienced
a lower surplus into the shareholders level (-13.2% y-o-y), which is in line with our view, but this was offset by the wakalah income contribution from the general fund to the shareholder level, which increased from RM26.9m in 2Q to RM30.8m in the quarter under review.
Claims remain healthy. For the general takaful operations, the group’s claims over net earned contributions ratio was largely healthy at 56.9% YTD, while that in the family takaful operation was largely maintained at 50.9% YTD.
Expenses tick up. However, on a sequential basis, earnings slipped 29.2% q-o-q, largely due to an uptick in the group's expenses. Its management expense ratio ticked up to 21.2% YTD, which we think was largely due to higher personnel costs. Likewise, other expenses increased by 30.9% y-o-y, largely due to commission expenses amounting to RM96.9m which it incurred at the group level. Meanwhile, STMB’s tax expenses climbed in tandem with the increase in expenses due to certain non-allowable expenses income, which caused the tax rate to inch up slightly to 22%. This is in line with our previous view that the Wakalah fee income upside may be accompanied by in increase in management and commission expenses at the shareholder/operator level. Nonetheless, as we are of the view that the increase or defrayment in expenses is non-recurring, we expect expenses to normalize going into the next quarter.
Maintain BUY. We reiterate our BUY call, with our FV retained at RM8.00, pegged to 12x FY13 EPS.
Top-line contribution still sturdy. STMB's 9MFY12 core net profit surged 45.0% y-o-y, boosted by significantly higher wakalah fees (+105.0% y-o-y) and a higher transfer surplus from its family takaful fund (+56.9% y-o-y). The general takaful fund experienced
a lower surplus into the shareholders level (-13.2% y-o-y), which is in line with our view, but this was offset by the wakalah income contribution from the general fund to the shareholder level, which increased from RM26.9m in 2Q to RM30.8m in the quarter under review.
Claims remain healthy. For the general takaful operations, the group’s claims over net earned contributions ratio was largely healthy at 56.9% YTD, while that in the family takaful operation was largely maintained at 50.9% YTD.
Expenses tick up. However, on a sequential basis, earnings slipped 29.2% q-o-q, largely due to an uptick in the group's expenses. Its management expense ratio ticked up to 21.2% YTD, which we think was largely due to higher personnel costs. Likewise, other expenses increased by 30.9% y-o-y, largely due to commission expenses amounting to RM96.9m which it incurred at the group level. Meanwhile, STMB’s tax expenses climbed in tandem with the increase in expenses due to certain non-allowable expenses income, which caused the tax rate to inch up slightly to 22%. This is in line with our previous view that the Wakalah fee income upside may be accompanied by in increase in management and commission expenses at the shareholder/operator level. Nonetheless, as we are of the view that the increase or defrayment in expenses is non-recurring, we expect expenses to normalize going into the next quarter.
Maintain BUY. We reiterate our BUY call, with our FV retained at RM8.00, pegged to 12x FY13 EPS.
Source: OSK
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