Etiqa listing positive for Maybank, investors

The listing will offer more options for investors looking for Shariah-compliant stocks, says analyst

by NG MIN SHEN / TMR file pix

The potential listing of Malayan Banking Bhd’s (Maybank) insurance company, Etiqa, on Bursa Malaysia would be welcome by investors given Etiqa’s solid fundamentals and the market’s appetite for Shariah-compliant and insurance stocks.

MIDF Amanah Investment Bank Bhd analyst Imran Yassin Mohd Yusof said Maybank would continue to reap the benefits of Etiqa’s earnings and its exposure to the stock market.

“Maybank is unlikely to forego Etiqa’s contribution to earnings. If Etiqa is listed, the group can reap the value of their holding in Etiqa while rewarding its stakeholders,” he told The Malaysian Reserve.

Etiqa’s RM1.01 billion in pretax profit achieved last year made up 8.8% of Maybank’s group pretax profit.

Group community financial services held the lion’s share of Maybank’s pretax number at 46.3%, followed by group global banking at 44.9%.

“Listing Etiqa will spur more interest in the insurance sector. It will offer more options for investors looking for Shariah-compliant stocks,” Imran Yassin said.

“The listing, should it take place, will unlock value for the insurance arm. It appears there will be no fundraising, just an issuance of shares to existing shareholders, so that will reward shareholders with a direct hold on the insurance business,” he added.

According to a recent Reuters report, Maybank — the country’s largest lender by assets and market capitalisation — is planning to spin off its insurance arm with a listing to follow later this year.

Its insurance business is parked under Etiqa International Holdings Sdn Bhd, which owns 69% of Maybank Ageas Holdings Bhd, which in turn controls several Etiqa units. The remaining 31% is held by Belgian multinational insurer Ageas Insurance International NV.

The report said Etiqa, which operates in Malaysia, Singapore, Indonesia and the Philippines, is estimated to be worth at least RM3.89 billion.

Maybank investors are expected to receive shares in the insurance entity once listed — in proportion to their existing holding in the bank, while no new funds will be raised, it added.

CIMB Investment Bank Bhd in a research note last Friday said the move was positive, but retained its ‘Hold’ call on Maybank.

It believes the listing has been priced in, given the bank’s price-to-earnings ratio of 13.5 times for the forecast financial year ending Dec 31, 2019 (FY19F), versus the historical five-year average of 11.1 times.

CIMB estimated Etiqa’s market capitalisation to range between RM5.3 billion and RM10.7 billion upon listing, based on a price-to-book value (PBV) of 1.4 times to 2.8 times, which is based on Syarikat Takaful Malaysia Bhd’s PBV.

“We estimate Maybank shareholders could get nine to 17 sen worth of Etiqa shares (based on book value) for each Maybank share held from any distribution of Etiqa shares.

“We estimate that every 1% point stake in Etiqa International Holdings distributed to shareholders would lower Maybank’s pretax profit by 0.1%, based on FY17 earnings,” it said.

Etiqa’s pretax profit rose 18.5% to RM1.01 billion in 2017 from RM855 million recorded in the year prior, while total combined gross premium and contribution amounted to RM6.2 billion.

Total assets stood at RM34.47 billion as at end-2017, while investment income came in at RM1.23 billion.

According to the insurer, it maintained its top position in Malaysia’s general insurance and general takaful segment with an 11.8% share of the market, and the fourth position in the life and family segment with an 8.9% market share.

Etiqa claims to hold an over 70% market share as an online insurer, while its bancassurance channel has a 19% market share of regular premium sales.


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