TUNEINS (5230) : Tune Ins Holdings Bhd - Flying at lower altitude amidst adverse weather conditions
Target RM3.00 (Stock Rating: ADD)
Tune’s 9MFY14 net profit was below expectations at 64% of our full-year forecast and 65% of consensus. This was because we had under-projected the claims ratio; hence, we raise the ratio from 30% to 34% for FY14. This leads to a drop in our FY14 EPS forecasts and DDM-based target price (COE of 9.2%; LT growth of 5%). However, our FY15-16 numbers are unchanged. Despite the weaker-than-expected 9M results, we are unwavering on our Add recommendation on Tune, as the potential re-rating catalysts are intact, including 1) the swift expansion of its travel insurance business in the region, with the new market in the Middle East, 2) the growth prospects in the non-life insurance market in Thailand and 3) more tie-ups with other airlines.
Difficult times in Thailand and Indonesia
Tune’s travel insurance (TI) business was also affected by the adverse economic conditions in Thailand (political unrest) and Indonesia (high inflation). In 9M14, the policies earned for the TI business even fell by 11.4% yoy in Indonesia and only rose by 3.3% yoy in Thailand. However, the 9M14 profit from the TI unit still increased by 9.7%, on the back of a healthy 12.7% yoy topline expansion, thanks to a better performance in other markets. A positive aspect of 3Q14 was the maiden full-quarter contribution of RM2m from its associate companies in Thailand and the Middle East.
Higher topline for TIMB but…
The gross premium of its non-life insurance unit, Tune Insurance Malaysia Berhad (TIMB) rose by a strong 15.9% yoy in 9M14 to RM292.3m. Nonetheless, its net profit plummeted by 28.5% yoy to RM13.8m, affected by a higher claims ratio, primarily in the motor insurance segment, in our view.
Clearer skies in 2015
We envisage better earnings prospects for Tune in 2015 due to 1) the improving economic conditions in Thailand and Indonesia and 2) full-year contributions from the associate companies in Thailand and the Middle East. Also, the expansion of the TI business could help to lower its claims ratio.
Source: CIMB Daybreak - 18 November 2014
Target RM3.00 (Stock Rating: ADD)
Tune’s 9MFY14 net profit was below expectations at 64% of our full-year forecast and 65% of consensus. This was because we had under-projected the claims ratio; hence, we raise the ratio from 30% to 34% for FY14. This leads to a drop in our FY14 EPS forecasts and DDM-based target price (COE of 9.2%; LT growth of 5%). However, our FY15-16 numbers are unchanged. Despite the weaker-than-expected 9M results, we are unwavering on our Add recommendation on Tune, as the potential re-rating catalysts are intact, including 1) the swift expansion of its travel insurance business in the region, with the new market in the Middle East, 2) the growth prospects in the non-life insurance market in Thailand and 3) more tie-ups with other airlines.
Difficult times in Thailand and Indonesia
Tune’s travel insurance (TI) business was also affected by the adverse economic conditions in Thailand (political unrest) and Indonesia (high inflation). In 9M14, the policies earned for the TI business even fell by 11.4% yoy in Indonesia and only rose by 3.3% yoy in Thailand. However, the 9M14 profit from the TI unit still increased by 9.7%, on the back of a healthy 12.7% yoy topline expansion, thanks to a better performance in other markets. A positive aspect of 3Q14 was the maiden full-quarter contribution of RM2m from its associate companies in Thailand and the Middle East.
Higher topline for TIMB but…
The gross premium of its non-life insurance unit, Tune Insurance Malaysia Berhad (TIMB) rose by a strong 15.9% yoy in 9M14 to RM292.3m. Nonetheless, its net profit plummeted by 28.5% yoy to RM13.8m, affected by a higher claims ratio, primarily in the motor insurance segment, in our view.
Clearer skies in 2015
We envisage better earnings prospects for Tune in 2015 due to 1) the improving economic conditions in Thailand and Indonesia and 2) full-year contributions from the associate companies in Thailand and the Middle East. Also, the expansion of the TI business could help to lower its claims ratio.
Source: CIMB Daybreak - 18 November 2014
