KUALA LUMPUR (July 3): CIMB IB Research has downgraded the Malaysian insurance sector to Neutral and said it is fairly valued now at 12M forward P/E of 11.1x, above its 1 year historical average of 9.3x.

In a note July 2, the research house said it is positive on the outlook for the takaful industry, projecting premium growth of 6%-7% for general takaful, and low teens for family takaful in 2019F.

“We recently downgraded Syarikat Takaful Malaysia Keluarga (STMK) from Add to Reduce, despite it being a beneficiary of strong growth in the takaful industry’s total premium as its one-year forward rolling P/E of 15.7x on 21 June was at 1 s.d. above its 5-year historical average, while its forward rolling P/BV of 5.4x was close to 3 s.d. above its 5-year historical average.

“Tune Protect is our top pick for the sector, as we believe its ongoing transformation programme will positively impact its FY19-21F earnings. Its valuation is also attractive, as its CY20F P/E of 6.6x is below its 5-year average of 15x,” it said.

At 11.55am, STMK dipped 1.28% or 9 sen to RM6.93 for a market capitalisation of RM5.73 billion, while Tune Protect added 0.73% or 0.5 sen to 69.5 sen for a market capitalisation of RM522.47 million.