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Thursday, July 19, 2018

MNRB: Share Price Plunged


Latest Development

MNRB has announced that it plans to carry out a Rights Issue to raise RM400 million by end of 2018. The proceed will be used for the following purposes:
1) RM300 million to fund 2 companies Takaful Iklas Bhd and a new company that will assume the general takaful business from Takaful Iklas Bhd; and
2) RM100 million to develop new products for the local insurance market.
As noted before, the market is adverse to any form of fund-raising exercise these days. Thus the market reacted very negatively to this Rights Issue announcement from MNRB. This resulted in the share price plunging as much as 35 sen to a low of RM1.99. See the daily & monthly charts below.


Chart 1: MNRB's daily chart as at Jul 19, 2018_3.30pm (Source: Shareinvestor.com)

 
Chart 2: MNRB's monthly chart as at Jul 19, 2018_3.30pm (Source: Shareinvestor.com)

Financial Performance

MNRB's financial performance over the past 5 quarters has been satisfactory. This compared favorably to the loss-making period from late 2014 to early 2016. The improved performance was attributable to favorable investment holding and takaful business as well as steady performance from the general reinsurance business which more than offset the poorer performance from the retakaful business.


 Table: MNRB's last 10 quarterly results

Looking at the long-term profit trend, MNRB is affected by competition which lowered its profit margin. The question is how will it improve its bottom-line if profit margin remains depressed.


Graph: MNRB's last 44 quarterly results

Valuation

MNRB (at RM2.04 as at 4.44pm) is now trading at a very low PER of 4.8 times (based on last 4 quarters' EPS of 42.8 sen). Its PBR is also undemanding at 0.4 time. BAsed on such attractive valuation, MNRB is a good stock for long-term investment.

Conclusion

Based on attactive valuation, MNRB is a good stock for long-term investment.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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