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Friday, November 15, 2013

MPHB Capital - Higher Claims Ratio in 3Q13

Source: http://klse.i3investor.com/blogs/kltrader/41092.jsp

Maintain BUY. MPHB Cap„s 3Q13 net profit of MYR12m (-17% QoQ) brought cumulative six months (Apr-Sep 2013) net profit to MYR26m. The results were marginally behind expectations, due to a higher-thanexpected claims ratio and lower investment gains. To note that for FY13, the group will be reporting results for just nine months, given that it was only incorporated earlier this year, but our pro-forma earnings assume a 12-month contribution. We trim our net profit forecasts by 4% for FY13-15, but maintain our SOP of MYR2.12, offering 25% upside.

Momentum sustained. Multi-Purpose Insurans (MPIB) saw net earned premium (NEP) growth of 12% YoY in 9M13, lagging our target of 17% for the year. Nevertheless, some lumpy renewals are expected in 4Q13, and management is confident of playing catch-up in 4Q13. 3Q13 NEP rose 11% YoY, more than compensating for the loss of business from AirAsia. Motor NEP increased 14% YoY with MPHB Cap‟s inclusion in new auto panels while fire premiums NEP rose 11% YoY. Medical insurance saw NEP jump 41% YoY. In 3Q13, motor accounted for 27% of total premiums while fire and medical accounted for 23% and 7%.

Claims ratio rose. The setback during the quarter comes from the claims ratio rising 2ppts to 61.8% in 3Q13 vs 59.8% in 3Q12. Claims were generally higher across the board, with motor registering a higher claims ratio of 78.5% in 3Q13 vs 77.9% in 3Q12, while fire saw a higher claims ratio of 31.6% vs 30.4% previously.

Rawang will be first JV to launch. Of the group‟s three joint ventures (JV) property development with Bandar Raya Development, Rawang (365 acres) will be the first to launch in the middle of next year. Development is over 10 years with a GDV of MYR1.5b, and it will primarily be residential. Recall that MPHB Cap will share in 22% of the profits. We have yet to factor in any contribution from this development.

Upside from Balik Pulau land. Property valuations are based on a recent assessment by three independent valuers, while we value MPIB at a end-June 2013 P/BV of 1.6x and MP Credit at 1.0x P/BV. Gains from the recent sale of the group‟s 208 acres in Balik Pulau, Penang at MYR25/sqf would lift our SOP by 27sen to MYR2.39/shr (41% upside).

Source: Maybank Research - 15 Nov 2013


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