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♦ We believe that LPI will be able to grow its gross premium by 21%, underpinned by the improvement in the property market, further expansion of its agency force and continued premium contribution from its bancassurance tie-up with Public Bank.
♦ For FY10, we are not expecting significant changes from FY09’s gross premium breakdown as management indicated that they expect to maintain the composition of its business portfolio.
♦ Number of agents has increased from 1,388 in FY09 to 1,400 currently. LPI has also introduced three different classes of elite agents that are determined by the respective agent’s ability to achieve and maintain a minimum level of profitable premium income.
♦ We believe LPI may undertake a corporate exercise in FY12/10 to increase the liquidity of its stock. The options include a bonus issue or a share split, both of which would not require any more capital commitments by investors. We estimate that it could potentially issue bonus shares of 3-for-4 based on its reserves as at the latest quarterly results.
♦ We have changed our forecast assumptions to incorporate: 1) higher gross premium growth of 21%; 2) higher claims ratio of 48%; and 3) lower management expense ratio of 18.5%. As a result, we have raised our FY10-12 earnings forecast by 0.3-3.6% p.a..
♦ Maintain Outperform, with a new fair value of RM16.70 (RM16.65 previously)
RHB Equity 360° - 18 May 2010 (LPI, EON Cap, Sunway, Kencana, MISC, Evergreen, MAHB, KLCCP, Sino Hua-An, MA...
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