MNRB- a good long-term BUY

Background

Another insurance player that we can look at is MNRB Holdings Bhd ('MNRB'). It is involved in re-insurance as well as in takaful insurance.



Past Financial Results

Its past 5 years' results have been quite encouraging. However, it must be noted that its results for FY2008 was boosted by an extraordinary profit of RM75.4 million from the disposal of its 3.24%-stake in MOX to Aga Aktiebolag for RM17.00 per share.



Recent Financial Results

MNRB's last 2 quarters' results have been disappointing. It reported a net loss of RM13.3 million & RM13.8 million for 2Q2009 & 3Q2009, respectively. The loss was due to higher claim incurred by the re-insurance subsidiary as well as additional provision for diminution in value of quoted securities.



Valuation

Ignoring the recent losses- which is either one-off (in the case of the higher claim from the re-insurance business) or fairly common (in the case of provision for diminution in value of quoted securities during bear market), we can expect MNRB's earning to rebound back to 40-50 sen when the economy recovers in 1 to 2 years' time. As such, the stock is now trading at a forward PE of 6-7 times. That's fairly attractive.

Technical Outlook

MNRB has a recent low of RM2.60 in March 2009 that's lower than the low of RM2.73 recorded in December last year. As it has yet to put in a decent rebound, we may not have seen the low in this current cycle for this stock. However I believe that the stock's downside may be limited, given the recovery in broader stock market would be supportive of this stock at its present price.


Chart: MNRB's monthly chart as at 10/4/2009 (Source: Quickcharts)

Conclusion

Based on sharp drop in share price & potential recovery in the economy, MNRB could be a good long-term BUY at the current price.