KEY INVESTMENT HIGHLIGHTS

• 6MFY24's Core NP of RM196m was Within/Within our/street forecasts: 50%/50% of full-year forecasts
• Core themes: (a) Investment returns were still very strong, (b) Weaker quarterly takaful service result
• Forecasts unchanged
• Maintain BUY | Unchanged TP of RM4.97 | based on an unchanged FY25F P/BV of 1.84x

Verdict: Decent dividend yields. We feel that STMB, given its high credit-linked contribution exposure, should benefit from the recent upsurge in loan demand.

Yays

1. Solid economic outlook bodes well for overall growth.
2. Islamic financing growth is promising, considering STMB's proclivity to credit-linked contributions.

Nays

1. Takaful industry remains highly competitive.

OKs

1. Steep medical inflation is less of an issue, due to its low exposure.
2. Moderate dividend yields of 4-5% are lower than some industry peers.
3. Investment returns are unpredictable and unsustainable.

Results in a nutshell:

▲ 6MFY24's Core net profit (NP) of RM196m up by +25%yoy.

Increased takaful revenue and lower retakaful expenses offset higher takaful expenses. Higher investment returns also helped.

▼ 2QFY24's Core NP of RM94m down by -8%qoq. The decline was attributable to weaker takaful revenue and an uptick in takaful expenses - particularly for claims and "others".

Forecasts unchanged. We make no changes to our earnings forecast.

Key downside risks. (1) Higher-than-expected claims/reinsurance ratio, (2) Slowdown in GWP growth, (3) Further increases in operational cost.

Maintain BUY call: Unchanged GGM-TP of RM 4.97 (from RM4.97). The TP is based on an unchanged FY25F P/BV of 1.84x.

(GGM assumptions: FY25F ROE of 20.2%, LTG of 3.5% & COE of 12.6%)

Source: MIDF Research - 2 Sep 2024