Syarikat Takaful Malaysia (STMB) announced its
proposal to establish a 10-year long-term incentive plan (LTIP) to reward its
key employees and directors. This will help the company to stay on a
competitive edge amid an increasingly acute talent shortage in the local
takaful industry. Maximum new shares will be 16.3m and our FV will be lowered
to RM7.46 in the unlikely worst case scenario. STMB remains our top BUY for the
sector.
Addressing human capital issues. Malaysia Takaful Association
chairman Zainudin Ishak expressed that the takaful industry has long faced an
issue of talent shortage, specifically in professionals technically versed in
takaful principals. He also commented that the industry lacked the ‘pulling
factor’ to attract the best talent. We have highlighted in our sector update
that the incoming Islamic Financial Services Act (IFSA) may force many takaful
players to split the family and general takaful businesses, therefore
intensifying the future demand for key talents. As STMB is also expected to be
impacted by the IFSA ruling, we are positive on the LTIP as it will help the
company to stay on a competitive edge in the hiring of future key employees. We
do not think the LTIP will be misused by any individuals as the IFSA has a
provision to limit the individual ownership of insurers/ takaful operators at
10%.
Diversifying income channels. We note a string of news flows on
corporate exercises which may involve Bank Islam and its expectations that
loans growth moderate to 20%-25% from 38% in FY12. We do not see significant
risks of STMB’s reliance on Bank Islam (as a bancatakaful partner) to its
near-term takaful contributions growth given that it still retains
relationships with several other bancatakaful partners. The group is already
diversifying its distribution channel by looking for more financial partners as
well as expanding the role of its corporate agents and brokers.
Maintain BUY. Since we view human capital as a key growth
driver, considering that the takaful industry is small and still at a young
stage, the LTIP reassures us of STMB’s valuations. Maintain BUY, with FV at
RM8.00, pegged to its FY13 EPS.
Source: RHB
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