KUALA LUMPUR: Non-bank financial institution (NBFI) sector earnings growth is expected to hold up in 2024, supported by a decent macroeconomic backdrop.
RHB Investment Bank Bhd (RHB IB) said it remains bullish on insurers but is more selective towards non-bank lenders given the sub-sector’s mixed risk-reward offerings.
“We are expecting a moderate year for insurers under our coverage for two key reasons, namely, an expected slowdown in car sales coming off a record-high year in the financial year 2023 and moderation in total investment returns, largely due to an absence of the low-base effect.
“Nevertheless, stabilising claims and reinsurance costs, as well as a pickup in life insurance or family takaful contributions should enable mid-single digit bottom line growth, at the least,“ the bank said in a research note today.
As such, RHB IB has downgraded the sector to a “neutral” with Aeon Credit Service Malaysia Bhd and Syarikat Takaful Malaysia Keluarga Bhd selected as its top picks.
“Both (companies) are demonstrating healthy fundamentals and possess bright growth prospects but respectively trading at significant discounts to historical mean valuations.
“On the flipside, stretched valuations for certain counters present a profit-taking opportunity,“ it said.
Meanwhile, RHB IB said Bursa Malaysia’s share price has performed decently year-to-date, having added eight per cent since the start of the year and 21% since June 2023.
“While management is upbeat on an improvement in securities average daily value (SADV) in 2024, we believe the market has largely priced in these expectations.
“On the other hand, Bursa Malaysia’s ventures into new territories (carbon markets, debt fundraising and others) are unlikely to contribute meaningfully to its topline in the medium term.
The bank is “neutral” on the local bourse, with the biggest upside risk could come from better-than-expected SADV, while downside risk could come from greater-than-expected operating expenses. – Bernama