KUALA LUMPUR (Feb 5): LPI Capital Bhd’s (KL:LPI) impending sale of its minority stake in Public Bank Bhd (KL:PBBANK) could potentially translate into a special dividend yield of up to 18%, an analyst said on Wednesday.

Based on Public Bank’s last closing price of RM4.40 per share, LPI Capital’s 1.1% stake would be worth RM940 million, though the company has yet to determine how it would use the proceeds from the sale, Kenanga Investment Bank (Kenanga IB) said in a note, following a meeting with the management.

“We rule out the possibility of inorganic growth” as Lonpac Insurance Bhd, a key subsidiary of LPI Capital, is ahead of its peers in terms of profitability, Kenanga IB said. “Any potential acquisitions are more likely to be dilutive to the group.”

Under the Companies Act, LPI Capital is required to sell its 1.1% holdings of Public Bank’s shares held within 12 months, as the company is now a subsidiary after being acquired by Public Bank.

In December 2024, Public Bank announced that it has completed the acquisition of 44.15% stake in LPI Capital from the estate of the late Tan Sri Teh Hong Piow and its private vehicle Consolidated Teh Holdings Sdn Bhd.

Assuming LPI Capital’s average historical payout ratio of 80%, the sale could potentially lead to RM1.89 per share in special dividends, or nearly 15% in additional yield, according to Kenanga IB’s estimates. A full payout, meanwhile, comes up to RM2.36 per share or 18.4% in additional yield.

Kenanga is keeping the stock on an “outperform” call, noting that LPI may see a better 2025, as past pains from floods are not likely to reoccur, given lower underwriting exposure.

While the flooding in the final quarter of 2024 appeared to be more severe than the 2021 deluge, LPI Capital’s underwritten policies on industrial assets were less exposed, Kenanga IB said.

The 2021 massive floods, which affected 11 states in Malaysia, led to economic losses totalling over RM6 billion, and was described by the government as a “once in a century” disaster.

In the aftermath, LPI Capital’s net earned premiums fell 14% year-on-year in the first quarter of 2022, due to adjustments to provisions to reinsurance from the floods.

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