ALLIANZ: Financial Services Firm Delivers Robust Half-Year Earnings, Target Price Upped
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 () |
| Last Traded | RM0.20 |
| Recommendation |
A leading financial services firm has reported a strong set of earnings for the first half of fiscal year 2025 (1HFY25), significantly surpassing both internal and street expectations. The positive performance has led analysts to maintain a “BUY” recommendation and revise upwards the target price for the company’s shares.
Performance Review
For the first six months of FY2025, the firm recorded a Core Net Profit (NP) of RM461 million, exceeding full-year forecasts by 57% and 59% from internal and street estimates, respectively. This represents a substantial 29% year-on-year increase. The second quarter of FY2025 also saw a commendable performance, with Core NP reaching RM249 million, an 18% improvement quarter-on-quarter.
The stellar results were primarily attributed to disciplined cost management, with insurance expenses and net insurance finance expenses coming in lower than anticipated. A significant increase in insurance revenue also played a crucial role in offsetting higher operational costs. Furthermore, the general insurance segment demonstrated aggressive market share growth, while the life insurance arm effectively addressed healthcare-related issues, evidenced by promising co-pay program take-up rates and very high persistency ratios. Notably, a superior investment result in 2QFY25 provided a significant boost, offsetting higher insurance expenses in that period.
Challenges and Outlook
Despite the strong performance, the firm operates within a sector facing headwinds. Healthcare inflation and related issues continue to be a prominent overhang, alongside some uncertainty regarding dividend payouts. Key downside risks identified include weak Gross Written Premium (GWP) growth, a higher-than-expected claims ratio, and potential drag from investment income.
However, analysts have adjusted their Core Net Profit forecasts upwards by +5%, +2%, and +2% for FY25F, FY26F, and FY27F, respectively. This revision reflects the expectation of stronger insurance revenues, continued lower insurance expenses, and revised investment incomes. The firm’s current Price-to-Book Value (P/BV) of 0.59x is considered inexpensive, trading below the -1 standard deviation of its 5-year P/BV mean of 0.71x, and offers an attractive dividend yield of 5.6%.
Recommendation
Given the solid growth trajectory, effective cost control, and favorable valuation, the investment bank reiterates its “BUY” call on the stock, with a revised Sum-of-the-Parts (SOTP) Target Price of RM23.12, up from the previous RM21.59.
