LPI Capital faces exposure from Putra Heights gas blast?
KUALA LUMPUR: LPI Capital Bhd's potential exposure to the Putra Heights gas pipeline explosion may be minimal due to an Excess of Loss (XOL) treaty, a research house said,
The XOL ensures the reinsurer covers losses above the retention limit for properties and motor vehicles, according to Affin Hwang Investment Bank Bhd.
Affin Hwang expects LPI Capital's claims and combined ratios to stabilise in the coming quarters.
The research firm also noted that LPI Capital's net profit for the first quarter of 2025 (1Q25) was 3.3 per cent lower compared to the previous year.
But this is in line with expectations, with weaker earnings mainly due to significantly higher claims in the insurer's fire and miscellaneous units.
Affin Hwang maintained its "Hold" rating on the insurance company with a target price of RM14.20, on a cum-special dividend basis.
This is is derived from a price to book value multiple target of 2.3 times on the 2025 book value per share of RM6.19.
"We have factored in a lower target multiple on LPI due to the impact of lower subsequent earnings loss of annual investment income from PBB's dividends, leading to a flat net profit in 2026," it adds.
Meanwhile, Kenanga Research said LPI Capital has yet to fully realise the synergistic benefits from its acquisition by Public Bank Bhd, despite making significant progress in its fire insurance segment.
Kenanga Research said the company has formed a working committee to gradually implement cross-selling strategies, with the integration of agency and branch networks expected by financial year 2026 (FY26).
LPI Capital received shareholder approval on April 29 for the sale of its 1.13 per cent stake in Public Bank.
The company aims to distribute around 70 per cent of the proceeds as special dividends, while the remainder will be used to expand its investment portfolio.
In the financial year 2024 (FY24), dividend income from Public Bank accounted for about RM44 million, or 12 per cent of total earnings.
"We opine the disposal of LPI's shares in Public Bank would be from September 2025, after receiving the bank's first interim dividend for financial year 2025 (FY25), yet still ahead of the December 2025 disposal deadline," it said.
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