Thursday, January 28, 2016

Takaful: Earnings improved on higher fee income

Results Update

For QE31/12/2015, Takaful's net profit increased by 6% q-o-q or 22% y-o-y to RM36 million while revenue rose marginally by 4% q-o-q or 0.5% y-o-y to RM403 million. Revenue increased marginally y-o-y mainly attributable to higher sales generated by Family Takaful business. Its profit before zakat and taxation increased y-o-y mainly attributable to higher wakalah fee income.

Table: Takaful's last 8 quarters' results

From the Chart 1 below, we can see that the revenue is on the uptrend. Profit margin rose steadily over the past 4 quarters. The increased profit margin helped to stabilized the profit numbers despite lower revenue over the past 3 quarters.

Chart 1: Takaful's last 39 quarters' results


Takaful closed at RM3.76 yesterday. This means that Takaful is now trading at a PE of 19.6 times (based on the last 4 quarters' EPS of 19.2 sen). At this PE multiple, Takaful is deemed fully valued.

Technical Outlook

The stock has been in an uptrend in the past 4 years. However its movement was sideways for the past 6-7 months after the share split of 1-to-5. Considering 500%-increase in the outstanding shares, Takaful's share price movement has been fairly encouraging.

Chart 2: Takaful's monthly chart as at Jan 27, 2016 (Source: ShareInvestor)


Based on satisfactory financial performance & positive technical outlook, Takaful is still a good stock for long-term investment. However, its upside potential is limited as the stock is fully-valued.

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Takaful.

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