04 July 2013

Syarikat Takaful Malaysia Bhd

New fund was injected into my portfolio. Bought Takaful at RM4.75 per share, which is equivalent to PE~12x or DY~3%. This is the first GLC that appear into my long-term-growth portfolio.

Takaful Malaysia is a subsidiary of BIMB Holdings, which in turn is a subsidiary of Lembaga Tabung Haji. One thing I know about the management of LTH groups is, they are pretty good in stock-investment. This ability is a big advantage when come to managing an insurance company. Company's profit could be well enhanced by investment-surplus.

Currently, Takaful Malaysia ranked no.2 in term of market share (~20%) in Islamic insurance sector of our country. (The champion is Etiqa which has ~40% market share.)

 x x x

Growth record:

  * FY2010 consist of 18month.

  • 5-years CAGR of revenue was ~9%, while profit CAGR stood above 30%.
  • an upward trend of profit margin and ROE since FY2008. 
  • ROAE of FY2012 reach 20%.
 x x x

Future Growth Prospect

Bank Negara statistics shows that the contribution (premium) of Islamic insurance products was growing at an average pace of 18~20% p.a. in the past few years.

I'm quite optimistic that this momentum (15~20% p.a. growth) will continue for the next 3~5 years. About half of our country's population are Muslim, yet the current market size of Islamic insurance products is only ~1/4 of traditional insurance. I see a huge potential of growth here.

The company is leveraging on the networks of Bank Islam and Lembaga TH on promoting its products, and I believe that Syarikat Takaful could finally emerge as no.1 in Malaysia's Islamic insurance market.

Another supporting factor for the sustainability of the company's long-term-growth will be its subsidiaries in Indonesia. However, the contributions from these subsidiaries is quite low for the moment.

 x x x


Under the newly inforced IFA (Financial Sevices Act) and IFSA (Islamic Financial Services Act) 2013, an insurers are not allowed to carry life insurance and general insurance business under one company.

As a result, Syarikat Takaful, which now operates both family-takaful and general-takaful business, will be required to undertake either a restructuring (separate its business into two legal entities), or a divestment of one of its business.

However, I don't think this will cause a significant impact on my investment in Takaful.

 x x x

Expected return on investment: 15~20%p.a. for the next few years.
Expected investment period: at least five years.

I'll hold on to Takaful as long as it could maintain a double digit growth.

The investment in Takaful takes ~5% value of my fund.
Together with LPI, insurance companies now form ~20% weight in my portfolio.


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