Takaful: Earnings Dipped Sequentially

Results Update

For QE30/6/2016, Takaful's net profit dropped by 2% q-o-q to RM46 million on the back of a 27%-drop in revenue to RM462 million. Comapred to same quarter last year, revenue increased by 7%  while net profit rose by 17%. Revenue increased y-o-y mainly attributable to higher sales generated by Family & General Takaful business. Family Takaful business rose from RM287.3 million to RM310.9 million, due to higher sales of Family Takaful Group Medical & Family Takaful mortgage-related products. General Takaful revenue rose marginally from RM112.6 million to RM119.4 million due to higher business from Fire and commercial classes. Its profit before zakat and taxation rose y-o-y mainly due 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. Earnings continues to rise gradually while profit margins have stagnated of late.


Chart 1: Takaful's last 41 quarters' results

Valuation

Takaful (closed at RM4.00 yesterday) is now trading at a PE of 20 times (based on the last 4 quarters' EPS of 19.93 sen). At this PER, Takaful is deemed fully valued.

Technical Outlook

The stock has been in an uptrend in the past 5 years. The stock is showing a bit of weakness, with the MACD crossing below the MACD signal line. In addition, the Bollinger Bands are beginning to constrict. These mean that the share price may dip below the RM4.00. If that were to happen, one can only hope that the Bollinger middle band will once again provide support for the stock (at RM3.50) - like it did in late 2014.


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



Chart 3: Takaful's weekly chart as at Jul 27, 2016 (Source: ShareInvestor)

Conclusion

Despite high valuation & cloudy technical outlook, BIMB is still rated a HOLD based on its steady financial performance & its strong position in the takaful insurance business.

Note:
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.