LPI CAPITAL ---BUY

FROM STANDARD & POOR
LPI CAPITAL -- BUY
Still An Attractive Dividend Play
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LPI reported 2009 net profit of MYR126.1 mln (+21% YoY) on revenue of MYR738.3 mln (+15.6% YoY). This was slightly ahead of our expectations, coming in higher than our full-year net profit forecast of MYR120 mln.
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LPI's revenue rose on the back of higher growth in gross premium underwritten. Meanwhile net profit also saw significant improvement, supported by better underwriting results. The company’s claims ratio improved significantly to 47% from 51% in 2008. Underwriting improvement came predominately in the fire and miscellaneous segments and management guides that these will be the areas which the company will look to grow in the near to mid term.
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The company announced a net final dividend of 41.25 sen per share for 2009 (2008: gross final dividend of 55 sen). Cumulative net dividend of 67.5 sen for 2009 (2008: gross dividend of 85 sen) was, however, lower than our forecast of 71.25 sen.
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We project its gross premium to grow by 15%-16% in 2010 and 2011, driven by new branch openings (three new branches in 2010), increased agency sales force and growing bancassurance sales. In view of LPI’s prudent management record, we expect its underwriting results to remain stable and project claims ratio of 50% in the next 2 years. Our 2010 earnings forecast is largely unchanged and we introduce our 2011 forecast.