RHB Research is keeping its buy call for Allianz Malaysia with an unchanged target price of RM16.60, 24% upside and c. 4% yield.
The well-known insurance provider managed to record impressive financial results for its first half ended June 30, 2020 (1H20), beating expectations.
For 1H20, Allianz’s PATAMI of RM247 mil (14% increase from 1H19’s RM216.5 mil) went past expectations of up to 62% for the full year, while 2Q20’s PATAMI reached RM167.7 mil against last year’s RM117.6 mil.
The increase was partly attributed to RM368 mil fair value gains as the equity market rebounded significantly and bond yield compressed quarter-on-quarter (q-o-q)..
“Nonetheless, our estimated core PBT of RM206 mil was still 77% q-o-q and 42% year-on-year (y-o-y) higher despite weaker topline,” RHB Research analyst Liew Wai Hoong said in an August 29 note.
Its 2Q20 profit also had a handsome rebound of RM167.7 mil from 2Q19’s lower RM117.6 mil, which was mainly derived from lower claim payouts and fair value gains.
“Underlying operations are seemingly intact and our thesis is playing out nicely. Allianz’s strong life in force book is able to sustain temporary slowdown in new sales,” Liew said.
He added that Allianz is expected to experience further topline recovery in subsequent quarters as the mobility restriction eases.
Meanwhile, the general gross written premium (GWP) and life annualised news premium (ANP) saw a q-o-q decline of 15% and 26% respectively, due to the movement control order (MCO).
AMB benefitted from lower claim payouts during the quarter as business activities slowed significantly during the MCO. Net claims paid for life and general segments fell 21% and 14% q-o-q, respectively.
“We expect the claim experience to normalise but this would be mitigated by topline recovery,” Liew added.
Pending clarifications from management after a briefing that is said to be conducted today, Liew said that no changes are made to the earnings forecasts and target price.
As of 10:35am today, Allianz Malaysia Bhd’s share price rose 4.01% to RM14.02 with a market capitalisation of RM2.48 bil.
