JKSB Quarterly Highlights_ People’s Insurance PLC (PINS) _3QCY16
PINS reported a significant 103% YoY increase in profit for 3QCY16, with a steeper-than-expected drop in underwriting profitability (-100% YoY) being offset by 1) a 73% YoY increase in interest and dividend income, supported by investment of IPO funds of ~Rs. 750mn in a rising interest rate environment; and 2) healthy fair value gains on the company’s equity investment portfolio, which is heavily dominated by banking sector stocks. While below-industry GWP growth has resulted in a slight loss of market share, the company maintains its fifth place positioning in the GI market, ahead of Allianz Insurance.
With 9MCY16 profit at Rs. 453mn, PINS is well on track to comfortably exceed our full year earnings projection of Rs. 569mn (+23% YoY) supported by a strong investment yield, with ~50% of IPO funds having been locked into debenture issues offering interest rates of ~11%, while on the fixed deposit side (~25% of IPO funds) the company has prudently invested in shorter tenor FDs in order to capitalise on an expected increase in deposit rates over the next six months. Looking ahead to CY17, we do not expect flood related claims in 2QCY16 to significantly impact reinsurance premiums on renewal of contracts. At its current price of Rs. 18.90, PINS trades at a CY16E P/E of 6.6x and a P/BV of 1.6x (based on NAV as at end Sep 2016), at a slight discount to the insurance sector average P/E. Given a stated 50% dividend payout policy, we expect PINS to pay a full year DPS in the range of Rs. 1.25-Rs. 1.50, translating to a generous 7%-8% dividend yield.
•JKSB is one of 15 founding members of the Colombo Stock Exchange with roots in share trading dating back to 1896, and is a subsidiary of John Keells Holdings PLC (JKH), the largest listed entity on the Colombo Stock Exchange with a market capitalization of US$ 1.3bn.
•JKSB’s core client base is Foreign Institutional Investors, Local Institutions and HNWI’s
•JKSB has a co-branded Research tie up with CIMB and a Research Referral agreement with Credit Suisse, along with trade execution relationships with several other global and regional securities firms.
•JKSB’s trade execution partners include Credit Suisse, CIMB, Merrill Lynch, Exotix, Daiwa, Convergex, Deutsche Asia Securities and Morgan Stanley
•JKSB is a research contributor to Bloomberg on ‘KEEL’
•The JKSB Research Universe covers 72 stocks across 15 sectors, with most Research efforts focused on approximately 45 of the more liquid counters.
•The JKSB Universe constitutes 67% of total market cap and approximately 80% of turnover at the CSE.
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