Syarikat Takaful Malaysia Keluarga Bhd (KLSE: Takaful, 6139) Analysis 2020

How do you choose a good business to invest in?

Look around you and take note of the brands that people are using. The common ones would be a good place to start.

Common investing wisdom

If one were to take the above advise in choosing a business to invest in, then in Malaysia, Takaful would likely be one of the obvious choices.

Insurance is increasingly becoming a must even for those working in the government sector as the burden of cheap, heavily subsidized healthcare is taking its toll on the government (thus the country and her people) and may likely see big changes in the future just as subsidized oil has.

Takaful is the obvious favorite especially among the Muslims (who incidentally make up a large portion of government workers).

Takaful is also one of only two syariah compliant insurance companies listed on the Malaysian stock market, making it an obvious choice for Muslim investors and traders.

Takaful is also one of the few dividend growers on the KLSE, a metric that income investors usually place great weight on.



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With the recent massive fall in its stock price and considering the above factors, Takaful may be a good consideration for investors, particularly those who are looking for cash flow.

Note though that I am invested in Takaful and have been building my position since the crash in March 2020 so I may be biased.

The charts though are pure fact and do not have biases…

Monthly chart

Takaful Monthly chart

The monthly chart shows that Takaful is currently hovering around a potential support/resistance area in the vicinity of RM4.25-4.3. This also coincides with the 50 period moving average (MA50).

Weekly chart

Weekly chart

The weekly chart shows Takaful rebounding strongly from its one year low around RM3.2.

Its 200 period moving average (green line) is still sloping up with the MA50 still trending above it indicating an intact long term uptrend. However, the MA50 is sloping downwards indicating a shorter term downtrend and prices will need to successfully clear the resistance of MA200 and RM4.25-4.3 to confirm an uptrend continuation. Should this resistance be broken, RM5 may be a point of potential resistance (albeit a weaker one).

Should price movement be rejected by the MA200/RM4.25-4.3 resistance, prices may go towards the RM3.2 support.

Conclusion

Given the current macroeconomic condition and the possible impending fallout from the COVID-19 pandemic which is not yet clear, I practice and advise caution. At the same time I also believe that these rare massive market crashes are golden opportunities to build wealth.

At current levels, should the RM4.3/MA200 support hold, it may head towards RM5. Given the recent bullish move, a short consolidation around this area should not be unexpected.

Should this level fail to form a support, prices may head back towards the RM3.2 level. Formation of potential reversal signals along the way may be opportunities to chip in some position.

Should the macroeconomic situation veer towards the worse end of the predicted spectrum (a reliving of the 1930 Great Depression), then we may potentially see RM2 levels again.

As a long term income investor though, for me, as long as people need insurance and as long as Takaful continues to pay generous dividends, I will by the pullbacks and the bears.

TAYOR

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