Wednesday, April 20, 2016

Takaful: Earnings Inched Up

Results Update

For QE31/3/2016, Takaful's net profit increased by 28% q-o-q to RM47 million while revenue rose 57% q-o-q to RM633 million. Revenue increased by 12.6% y-o-y mainly attributable to higher sales generated by Family & General Takaful business. Family Takaful rose from RM237 million to RM289 million from higher sales of Family Takaful mortgage-related products. General Takaful revenue rose marginally due to higher business from commercial classes. Its profit after before zakat and taxation was hardly changed due to lower tax expenses which offset decline in surplus transfer from Family Takaful business (due to lower realized gain from disposal of investment) & from General Takaful business (due to lower net investment 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 which helped to stabilized the profit numbers.

Chart 1: Takaful's last 39 quarters' results


Takaful closed at RM4.07 yesterday. This means that Takaful is now trading at a PE of 21 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 has been sideways for the past 9 months after the share split of 1-to-5. The breakout in in March failed and the share price is again within the range of RM3.70-4.20.

Chart 2: Takaful's monthly chart as at Apr 18, 2016 (Source: ShareInvestor)

Chart 3: Takaful's weekly chart as at Apr 18, 2016 (Source: ShareInvestor)


Despite high valuation & unexciting technical outlook, I would rate Takaful a HOLD due to its steady earnings growth.

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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