Stock Breakdown: TQM Corporation

TQM Corporation is a leading insurance broker in Thailand that is aggressively expanding its network via acquisitions, online policy sales, and business alliances with consumer brands such as BIGC.

It is a pure insurance broker and does not assume any insurance risks. Its high gross margin of nearly 48%, and a recent surge in business following the increase in new premiums from COVID-19, have been behind the recent surge in its share prices. 

It has set an overly ambitious target of premium revenue of 18 billion baht, revised up recently from 15 billion baht, and 12.8 billion baht last year. 

Over past year it has teamed up with Government Savings Bank, Krung Thai Card, Big C Supercenter, and Southeast Insurance, and will buy more insurance brokers to reach 50 billion baht in annual premium by 2023.

Thailand insurance brokerage industry is quite fragmented with over 600 insurance brokers. Although most banks and financial institutions have insurance agency business, TQM has unique flexibility in adding new products and new platforms, something other brokers lack. 

While the current valuation is rich, TQM may remain a high PE stock due to high profitability, high ROE, and ability to gain market share. Its key shareholders own more than 60 per cent of the company and may sell some shares as they did last year. 

Given the strong growth of its business however, any placement of shares will unlikely depress the stock price for a long time. 

The company may soon split the par value of its shares, a process which attracts more retail investors, and very often leads to share price spike for a short period. 

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