Review

• Tune Protect Group Berhad's reported 1Q24 core net loss of RM3.5mn (vs. our full-year net profit forecasts of RM25.6mn). We consider the result to be within estimates as we expect the group to turnaround in the coming quarters.

• QoQ, LBT decreased by RM18.5mn to RM4.1mn in 1Q24. We attribute the better performance to: i) increase of RM16.3mn in net of insurance financial result and ii) higher investment income. Note that the higher insurance revenue of RM94.6mn in 1Q24 (vs. RM43.1mn in 4Q23) is driven by the Perlindungan Tenang Vouchers impairment provision (RM43.6mn in 4Q23).

• 1Q24 insurance revenue decreased 22.3% to RM94.6mn mainly due to the group’s strategic decision to exit the low-retention commercial business. Coupled with higher claims and expenses related to the growth of the motor segment, the group posted a LBT of RM4.1mn (vs. PBT of RM3.8mn in 1Q23) as insurance revenue. As such, combined ratio increased by 14.5 pts to 109.8%.

• 1Q24 net written premiums (NWP) grew 18.3% YoY to RM90.2mn, boosted by motor and travel business. Motor NWP grew 31.6% YoY, led by intermediaries and partnerships channel growth. As for travel, NWP increased 17.5% YoY, driven mainly by AirAsia and VietJet.

Impact

• No change to our earnings estimates.

Outlook

• Moving into 2Q24, we expect travel business to grow by c.20% QoQ as international travel is expected to surpass pre-Covid level in 2024. The group’s travel partners (AirAsia, Vietjet, AirArabia) would expand its operational aircrafts by 8-17% in 2024. Travel growth will also be supported by the group plans to secure more airline partner and online travel agents, to offer travel insurance solutions in their platform.

• For motor segment, Tune Protect plans to manage claims and motor mix within the mid to high sum-insured motor segment. Note that the group has raised motor and motorcycle premium upwards by approximately 10% in Feb and Apr 2024 respectively.

Valuation

• We reiterate our Buy recommendation on the stock with a TP of RM0.48/share based on 0.6x CY25 PB.

Source: TA Research - 27 May 2024