HLG: 10 April 2008 LPI Capital - Upgrade to BUY

LPI Capital Bhd BUY



Price target RM13.60



Share price at 9 Apr RM11.20



Investment summary


Q108 earnings growth was pedestrian, but in-line with forecast. However, following its share price decline of -9% YTD, we upgrade LPI from a HOLD to a BUY: LPI is a safe (albeit illiquid) bet in a volatile market, given >7% sustainable net DY and 0.8x beta. We are neutral on general insurers given: (1) market maturity and low-growth; (2) increased competition from Takaful and composite insurers; (3) sector consolidation due to competition and introduction of risk-based capital framework, which could raise insurers’ market valuations.



Safe haven

Following recent share price declines, we raise LPI to a BUY. Stock looks attractive on 7% net DY and low beta, for investors who can tolerate its low liquidity.