Disposal of ATU not to have any material effects on Takaful M’sia

KUALA LUMPUR: Syarikat Takaful Malaysia Bhd’s (Takaful Malaysia) disposal of Asuransi Takaful Umum (ATU) will not have any material financial and operational effects on Takaful Malaysia and its group of companies for financial year 2017 (FY17), the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) projects.

Takaful Malayisa in a filing on Bursa Malaysia said that subsequent to the announcement made on August 17, 2016 in relation to the proposed members’ voluntary liquidation of ATU, there were several indication of interests from potential investors to acquire ATU which is held 64.7 per cent indirectly via its subsidiaries PT Syarikat Takaful Indonesia (STI) (29.49 per cent) and PT Asuransi Takaful Keluarga (ATK) (35.21 per cent).

“Therefore, the board of directors of Takaful Malaysia upon further deliberation on the best available option for ATU, decided to accept an offer from Koperasi Simpan Pinjam Jasa (KOSPIN), M Andy Arslan Djunaid SE and Bahroji for the disposal of ATU for a total consideration of seven billion Indonesian rupiah instead of proceeding with the earlier proposed members’ voluntary liquidation,” the group said.

Despite the disposal, MIDF Research did not think the exercise will justify a re-rating to the Takaful Malaysia financial year 2018 (FY18) earnings’ valuation.

According to the research arm, this is considering that that the total contribution from Takaful Malaysia Indonesian operations to the group’s bottom line only recorded less than one per cent of the total profit before zakat and taxation (PBZT).

“At this juncture, ATU will continue its existing block of the business pending the approval of proposed acquisition,” MIDF Research said.

“In the meantime, the takaful industry in Indonesia is expected to continue experiencing challenges due to economic scenarios.”

The research arm has however noted that the group remain optimistic to enhance its Indonesian Family Takaful business, operated under the name of Asuransi Takaful Keluarga, and market share with support from its distribution channel.

Moving forward, MIDF Research viewed the demand for Takaful Malaysia’s takaful products to continue to be resilient especially in Malaysia.

“This is premised on the company strong presence in the takaful market especially for Family

Takaful, with the largest market share,” it said.

Taking into account the low life/takaful penetration rate circa 56.2 per cent (versus 75 per cent target by 2020) and Takaful Malaysia’s ongoing developments to upgrade customer service via the gorup’s digitalisation plan, the research arm’s outlook for the group remained positive.

As such, MIDF Research maintained its ‘buy’ call on the stock with target price of RM4.90 per share.