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Tuesday, July 10, 2018

Kenanga maintains market perform on LPI as net profit meets expectations

Tuesday, 10 Jul 20188:46 AM MYT

KUALA LUMPUR: Kenanga Research said LPI Capital Bhd s core net profit came in line with expectations despite intensified competition following the detariffication of motor and fire insurance and compressing profit margins across the industry.

"The group reported 2Q18 core net profit (NP) of RM65.7m (-9% QoQ; -3% YoY), bringing 1H18 CNP to RM138.2m (+2%) which made up 43%/42% of our/consensus’ full-year estimates.

"We deemed the results to be within as 1HFY typically made up 42-44% of the full-year CNP.

"As expected, a first interim net DPS of 26.0 sen was also declared. We are expecting the group to declare a total net DPS of 60.0 sen (representing 74% payout), which is similar as last
year’s quantum."

For 1H18, revenue grew 5% driven by higher gross earned premium in the general insurance segment. Growth in the fire insurance and miscellaneous insurance segments made up for the shortfall in weaker machine, aviation and transit segment.

Kenanga said that although lower margin was observed with the combined ratio inching up, the group's top line/NEP managed to hold on to organic growth of 5%/13%, which it believes to be in line with the group's strategy to compensate for the lower margin with a bigger market share.

THe research house maintained market perform on the counter with an unchanged target price of RM16.30.


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