No impact expected on Tune Protect from stake acquisition in Laka

KUCHING: Analysts have projected that Tune Protect Group Bhd’s ( Tune Protect) proposed subscription of 9.99 per cent equity interest in Laka Ltd ( Laka) will have no impact on the group’s profit and loss ( P& L) statement.

Tune Protect recently announced in a filing on Bursa Malaysia that wholly- owned subsidiary Tune Direct Ltd had on June 7, 2018, entered into a new subscription and shareholders agreement (SSA) to subscribe for 9.99 per cent equity interest in Laka for a cash consideration of an aggregate subscription price of 499,478.07 pounds (approximately RM2.64 million).

According to Am-Investment Bank Bhd (Am-Investment Bank), this amount will be settled through the group’s internal funds and will not have any impact on gearing.

“Eventually, this will be treated as an investment in Tune Protect’s balance sheet,” the research firm said.

“Hence no impact is expected on the group’s P& L unless the equity stake in Laka is raised to the level for it to become an associate company of Tune Protect.”

Am-Investment Bank noted that the rationale of this investment is to leverage on the technology expertise of Laka and experience of its founders for Tune Protect to eventually become the leading digital insurer.

The research firm recalled that Tune Protect aims to widen the group’s distribution channels and reach for its insurance products digitally.

As such, Am-Invesmtent Bank made no changes to its earnings estimates as this transaction will be treated as an investment in the group’s balance sheet.

The research firm’s core net profit forecasts for financial year 2018 ( FY18F), FY19F and FY20F thus remained at RM54.2 million, RM67 million and RM77.9 milion respectively.

“We are seeing a recovery in the travel insurance business of Tune Protect which is a positive sign while the underwriting performance for its general insurance business has improved in the first quarter of FY18 (1QFY18).”