TUNEPRO, Early Bird Catches the Worm!
Tune Protect Group Berhad (TUNEPRO) operates
in the insurance industry via its various subsidiaries. The group is
engaged in several partnerships notably AirAsia, Cebu Pacific Air, Air
Arabia and Cozmo Travel Agency. Tune Protect’s is present is more than
50 countries across the Asia Pacific and Middle East North Africa
regions, with its main markets in Malaysia, Indonesia, Thailand,
Singapore and China. The group is well diversified in its insured risks
classes; motor (29.7%), fire (14.2%), marine, aviation and transit
(13.9%) and others (42.2%) in FY2015.Substantial shareholders as at 4 Apr 2016:
- Tune Group Sdn. Bhd. (16.64%)
- AirAsia Berhad (13.65%)
- CIMB SI II Sdn. Bhd. (9.40%)
| Valuation | BUY |
|---|---|
| Current price | RM 1.57 |
| Shares outstanding (approx.) | 751,759,980 |
| Market cap | RM 1.180 billion |
| Fair value | RM 2.10 |
| Margin of safety | 25.2% |
HIGHLIGHTS
- Strong growth potential
- Healthy balance sheet and cash flows
- Beginning of a bullish trend, strong buy consensus
ANALYSIS
Financial Ratios @ Reuters: TUNE.KL
Please note that I have computed all
ratios reported below from original sources unless stated otherwise. For
other various ratios, please refer to Reuters.
Strong growth potential, guidance from management
The recent quarterly results have
reported strong double digit growth in both revenue and net profit.
Revenue improved 16.4% yoy while net profits rose 37.3% yoy. This is a
good start for the new financial year, leveraging on the excellent
performance by its AirAsia partnership. Bottom-line growth was mostly
attributed to a 25.2% net earned premiums in motor, medical and fire
class (+18.6%) and the global travel division (+6.5%).
In the QR press release, Mr Junior Cho,
CEO of TUNEPRO expresses his confidence on the groups capabilities to
maintain its solid performance throughout FY2016. To read the release,
click here.
Healthy balance sheet and cash flows
The group has invested heavily with its
excess cash, with 93.3% in debt securities, unit trust funds, loans and
deposits with financial institutions. Effective returns from these
investments range from 4.28-5.00%. With RM 602 million invested at
4.28%, total returns and cash flow is approximately RM 25.7 million,
contributing about 1 quarter worth of net profit.
On a per share basis, as at 31 March
2016, TUNEPRO has RM 0.86 in cash and cash equivalents and 6 cents in
debts; hence a RM 0.80 net cash position. Investment yields 3.4 cents
per annum. Finally, data from BursaMarketPlace shows that TUNEPRO has maintain a positive free cash flow in 3 out of 5 years.
Technical charts and analyst consensus
Based on the technical chart above, a
trend channel was formed since early March 2016. TUNEPRO has also broken
the SMA200 line confidently, which implies the start of a bullish
trend.
According to Reuters,
TUNEPRO is under the coverage of 6 analysts, out of which 3 rated a BUY
and 3 rated OUTPERFORM currently. Kumpulan Wang Persaraan (KWAP), has
began accumulating the shares after reducing its position from 7.36%
(announced 26 Oct 2015) to 5.46% direct interest (announced 12 February
2016). As at 9 June 2016, KWAP announced 6.16% direct ownership. If KWAP
intends to accumulate back to a 7.36% stake in the group, KWAP has to
buy approximately 900,000 shares which implies a RM 13.68 million
injection into the market. I am also reasonably confident that there are
other funds accumulating this counter.
VALUATION
Fair value of RM 2.10 based on a P/E of 21.02x from a TTM EPS of 9.99 cents. At fair value, yield is 2.4% based on 5 cents payout in the recent quarter.
Best regards,
Shaun Loong
See also: Valuation Guidelines & Site DisclaimerTUNEPRO (5230) - TUNEPRO, Early Bird Catches the Worm!
https://megamicrocaps.wordpress.com/2016/06/10/tunepro-early-bird-catches-the-worm/
