NBFI earnings to hold firm in 2024 on healthy fundamentals
The earnings growth of non-bank financial institutions (NBFI) is expected to hold up in 2024, supported by a decent macroeconomic backdrop.
RHB Research said it remains bullish on insurers but is more selective towards the non-bank lenders given the sub-sector’s mixed risk-reward offerings.
“We are expecting a moderate year for insurers under our coverage for two key reasons, namely, an expected slowdown in car sales coming off a record-high year in 2023 and moderation in total investment returns, largely due to the absence of a low-base effect.
“Nevertheless, stabilising claims and reinsurance costs, as well as a pickup in life insurance or family takaful contributions should enable mid-single digit bottom line growth, at the least,” the research house said in a note yesterday.
As such, RHB Research has downgraded the sector to a “neutral” with Aeon Credit Service Malaysia Bhd and Syarikat Takaful Malaysia Keluarga Bhd selected as its top picks.
“Both companies are demonstrating healthy fundamentals and possess bright growth prospects but are trading at significant discounts to historical mean valuations.
“On the flip side, stretched valuations for certain counters present a profit-taking opportunity,” it said.
The research house also said Bursa Malaysia’s share price has performed decently year-to-date, having added 8% since the start of the year and 21% since June 2023.
“While management is upbeat on an improvement in securities average daily value (SADV) in 2024, we believe the market has largely priced in these expectations.
“On the other hand, Bursa Malaysia’s ventures into new territories such as carbon markets and debt fundraising are unlikely to contribute meaningfully to its topline in the medium term.
Bursa Malaysia reported profit after tax, minority interest and zakat of Rm252.4mil for its financial year ended Dec 31, 2023, an 11.4% increase from the Rm226.6mil reported in the previous financial year.
The growth was attributed to higher operating revenue by 1.3% to Rm592.8mil from Rm585.3mil in FY22
The research house is “neutral” on the local bourse, with the biggest upside coming from better-than-expected SADV, while downside risk could come from greater-than-expected operating expenses.