Syarikat Takaful Malaysia Keluarga Bhd’s growth remains buoyant despite the disruption brought about by the Covid-19 pandemic, which started in early 2020.
The general insurance provider achieved the highest growth in profit after tax (PAT) in the financial services sector (below RM10 billion market capitalisation) at The Edge Billion Ringgit Club 2022. It was the second time that it had won a BRC award for earnings growth after 2019.
For the period under review between 2019 and 2021, Syarikat Takaful’s risk-weighted PAT grew at a compound annual growth rate (CAGR) of 11.7%, a decent growth amid uncertainties stemming from the pandemic that has reduced economic activities globally, following various degrees of movement restrictions imposed to curb infection rates.
The group recorded PAT of RM364.8 million for the financial year ended Dec 31, 2019 (FY2019), after which its profitability continued to gain momentum, reaching RM362.4 million in FY2020 and the highest of RM411.4 million in FY2021.
Syarikat Takaful is the second-largest general takaful provider in the country, with a market share of 24%. It has carved a niche as a pure player in the takaful space.
The group said its successful digital transformation journey has enabled it to remain as one of the leading takaful operators in the industry.
Its market penetration was further enhanced in FY2021, following its aggressive digital marketing programme, resulting in an 11% year-on-year sales growth.
Syarikat Takaful was set up by the government in 1981 as a task force to study the feasibility of establishing an Islamic insurance company in Malaysia. It was incorporated in 1984 and listed on the Main Board of the Kuala Lumpur Stock Exchange a decade later in July 1996.
Shares in Syarikat Takaful closed at RM3.40 apiece on Nov 2, reflecting a forward price-earnings ratio (PER) of 8.7 times and a RM2.85 billion market capitalisation.
Despite its strong fundamentals, its share price has been under pressure over the past few months, owing to uncertainties related to the implications of a new accounting standard for insurance contracts. MFRS 17, which is the Malaysian equivalent of International Financial Reporting Standard (IFRS) 17, will be applied next year across the insurance industry in the country.
According to a poll by Bloomberg, seven analysts had a “buy” call on Syarikat Takaful while one suggested a “hold”, with an average target price of RM4.07 a share at the time of writing.
Over the past three years, the company has been consistent with its dividend distribution at 20 sen per share in FY2019 and 12 sen in FY2020 and FY2021 respectively.
For the first half (1H) of FY2022, Syarikat Takaful posted a 14.4% drop in net profit to RM156.39 million from RM182.69 million in the previous corresponding period, on the back of higher revenue of RM1.83 billion compared to RM1.62 billion previously.
The group said it would focus on enhancing its digital and technology capabilities to sustain its market leadership position.
“Amid the uncertainties in the current economic environment to support business expansion, the group remains vigilant and cautious in managing operating costs, business growth and [the] risk profile of our portfolio.
“As a pioneer and early adopter of online distribution and new digital technologies in supporting our distribution channels, we are able to reduce some sales and operational challenges faced during the Covid-19 pandemic period,” Syarikat Takaful says in a statement, along with its 1HFY2022 results announcement.
In an August report, CGS-CIMB Research says Syarikat Takaful’s 1HFY2022 net profit is within its expectations as it accounted for 48% of its full-year forecast and 49% of consensus’ estimate, despite the higher tax rate as a result of the one-off Cukai Makmur.
The research house expects the company to see a 24.6% y-o-y decline in net profit in 2HFY2022, owing to the higher tax expenses.
Overall, CGS-CIMB has retained its “add” call on Syarikat Takaful as its FY2023 PER of 7.9 times is below its five-year historical average of 10 times.
It adds that the company’s FY2022 to FY2024 forecast return on equity of 17% is one of the highest in the financial services sector. “We maintain our FY2022 to FY2024 earnings per share forecasts and dividend discount model-based target price of RM4.”