Tune Protect Group Bhd (Aug 14, 94.5 sen) Maintain buy with a higher target price of RM1.20: Compared with financial year 2017 (FY17), which saw Tune Protect Group Bhd’s core net profit suffered a 40% decline year-on-year arising from high motor claims liabilities, adverse effects of “opt-in” regulatory changes and higher marketing expenses, we believe that the FY18 to FY20 period will potentially be recovery years.
This will likely be driven by new partnerships and developments of new digital platforms, coupled with product innovations and introductions, cost-control measures, more digital initiatives and expansion of the company’s presence into other countries.
We raise our net profit forecasts for FY18/FY19/FY20 by +7%/+20.8%/+22.7%. Though there were top-line revisions of gross written premiums and net earned premiums, a lower net claims ratio and a lower commission ratio were the key drivers of our earnings revisions.
The Dynamic Pricing 2.0 with “artificial intelligence” features (to identify specific needs based on age, medical history and so on) is expected to be integrated seamlessly into AirAsia’s website, expected by end-2018.
Key downside risks include a sustained decline in its travel insurance segment and a sticky motor claims ratio. — Affin Hwang Capital, Aug 14
KUCHING: A significant amount of Tune Protect Group Bhd’s (Tune Protect) gross written premium (GWP) is expected to be underpinned by Malaysia’s general insurance business for 2018 estimate (2018E), while the rest is to come from digital global travel insurance, analysts observed.
For 2018E, Affin Hwang Investment Bank Bhd (Affin Hwang) expected the bulk of gross written premium (GWP) to be underpinned by Malaysia’s general insurance business (80 per cent of GWP), while the rest is to come from digital global travel insurance (approximately 10 per cent).
Nonetheless, at the profit-after-tax line, the research firm estimated that about 55 per cent will be driven by the digital global travel insurance segment.
“In our view, there may not be major unforeseen circumstances in the travel industry as well as the Malaysian general insurance market (motor, fire, marine or aviation or transport) that may drive down premium growth or a major calamity that could cause a spike in claims,” the research firm said.
“As Tune potentially introduces more innovative and new products into the market (working out a business model through a partnership with Laka Ltd from the UK), we believe that this will bring in additional revenues to the group.
Though the domestic general insurance market remains challenging and competitive, the research firm did not see significant price-discounting under the detariffed market (for motor and fire) in Malaysia.
Overall, Affin Hwang believed that the 2018-2020E period will be potentially recovery years compared to 2017, which saw Tune Protect’s core net profit suffer a 40 per cent decline year on year (y-o-y) arising from the high motor claims liabilities, adverse effects of the ‘Opt-in’ regulatory changes and higher marketing expenses.
“This will be driven by new partnerships with airlines or car dealers to promote Tune’s insurance products, introduction of Insurtech ideas, development of new digital platforms coupled with product innovation and introduction, cost-control measures (through panel workshop management), revised underwriting terms, more digital initiatives (claims processing, underwriting) and expansion of presence into other countries,” the research firm said.
Affin Hwang thus raised its net profit for 2018E, 2019E and 2020E by seven, 20.8 and 22.7 per cent, respectively.
“We believe that the earnings outlook in 2019-20E is increasingly more promising on the back of stronger revenue growth arising from initiatives to boost digitisation (which includes global travel and motor insurance) and potentially lower net claims.”
Dont forget, there are alot voters (and overseas media) flying back in May. Also, the voters will have two ways tickets. Most people will get the insurance from Tune.
Apart from it, most people travel using AA cause the price is still very competitive. As Affin Hwang forecast their growth will be better, thus, i believe Tune will perform better. Hope I am not wrong either.
The Q result may not that poor..Expected the revenue up but profit less due to operating cost up or payout rate is high(it is nature of insurance business). The growing prospect is still very good. With present price , the price down is limited and upside is much much higher... accumulate at low.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
slee
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Posted by slee > 2018-08-01 20:34 | Report Abuse
if play swing method, i think can collect some d.. yesterday n today consider triggered oversold