Why would i recommend TAKAFUL (6139)?

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Technical Chart: 2010 to 7 Apr 2020

 TAKAFUL's share price has slumped for 59% from its highest point (RM7.18 @ 24 Jun 2019) to RM2.93 (@ 17 Mar 2020) due to persimistic market condition. However, TAKAFUL has caught my attention due to following reasons:

1.  Insurance companies are defensive stock, their revenue and earning won't be significantly affected by market risk.

2. TAKAFUL is extremely undervalued! Based on historical average P/E of 15.62, the fair value of TAKAFUL should be around RM 6.90 (assume the growth rate in 2020 is 0%), which means it has potential upside of 109%!

3. High dividend yield (6%), compared with current FD rate of 2.xx%.

4. Fast growing company, with 5-years CAGR of 18% on EPS

5. 84% of its investment is debt related investment, which means its investment income (interest income) will be relatively stable, and the drop of OPR will lead to increase in fair value of debt securities.

Conclusion:
TAKAFUL is a fast growing company with high dividend, good profitability and healthy balance sheet. However, TAKAFUL may face slow growing in 2020 due to the potential slow down of economy. Besides, the weak market sentiment in stock market, may further drag down the stock price of TAKAFUL. Hence, investors are advised to:
1. Place TAKAFUL in stock watchlist, and purchase when the market is bottom; or
2. Slowly build position by making multiple purchase.


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