MNRB Spectacular Earnings Surprise

MNRB Holdings - Spectacular Earnings Surprise
Author: kiasutrader   |   Publish date: Fri, 1 Mar 10:10   |  >> Read article in Blog website


MNRB's  9MFY13  net  profit  at  RM97.1m  was  above  our expectations,  accounting  for 124% of our full FY13 earnings estimate. The 91.6% surge in profit was mainly due to lower  net  claims  ratio,  24.4%  higher  investment  income,  and  an  improvement  in
underwriting margins. We take the opportunity to upgrade our earnings estimates by as  much  as  50%  for  FY13/14  and  thus  upgrade  the  stock  to  a  BUY,  pegged  to  0.6x FY14  BV.  The  stock  is  a  laggard  amongst  reinsurers  in  the  region  which  trade  at closer to 1x BV with a 29% upside to our fair value.
Exceeded  expectations.  MNRB's  9MFY13  net  profit  at  RM97.1m  was  above  our expectations,  accounting  for 124%  of  our  full  year  earnings estimates.  During  3QFY2013, the  group  registered  a  net  profit  of  RM59.0m,  333%  higher  than  the previous year's corresponding period and higher q-o-q from 2Q's RM12.3m loss. The 9MFY13 profit surge of  91.6%  was  mainly  due  to:  i)  significantly  lower  net  claims  ratios  across  a  few  key business  segments,  ii)  24.4%  higher investment  income,  iii)  improvements  in  underwriting margins  as  well  as  increase  in  net  profit  margins  from  3.2%  to  5.6%.  This  was  however
offset  by:  i)  overall  moderate growth  of  8.4%  in  premiums/contributions,  and  ii)  higher  fee and commission expenses growth.
Source: OSK
Labels: MNRB

Comment
For fiscal year ended 31.3.12, a final dividend of 17% less tax was paid on 26.10.12. This is about 39% of its full-year earnings.

For fiscal year ended 31.3.13, dividend is expected to be not less than 25% less tax, assuming that the 4th quarter earning is the same or not less than 19.60 sen per share.

As at 31.12.12, the NTA of the stock was RM5.50 per share. The stock was last traded at RM2.89.

My concern about this stock is that there is no consistency in its earnings. This is perhaps the reason why the stock is being traded at such a big discount to its net tangible assets. Nonetheless, at RM2.89, the stock should eventually turn out to be an excellent buy.
As usual, you buy at your own risk.