Analysts remain bullish on Tune Protect as better H2 seen

PETALING JAYA: Despite the lack of nearterm earnings visibility, the market seems to be keeping a positive stance on Tune Protect Group Bhd, on predictions of a stronger financial performance in the second half of the year.

The travel and general insurance provider still held its rank with six “buy” ratings and two “hold” calls from analysts, according to Bloomberg’s poll, after earnings fell by half to RM13mil in its second-quarter results announced last Friday.

CIMB Research has kept its ‘add’ recommendation with a target price of RM1.71, as the house believes that Tune Protect’s new initiatives will help revive its earnings growth in the next few quarters.

The insurer’s first-half financial year 2017 (FY17) net profit plunged by 50.3% year-onyear (y-o-y), attributed to a 4.5% y-o-y drop in net premium and a higher claims ratio of 45% during the period, compared to 27% in the first half of FY16. The dip in earnings in the first half of the year was the lowest since the stock was listed in 2013, CIMB noted.

“We project a higher net profit in the second half of FY17 forecast versus the first half of this year, as the fourth quarter is seasonally the strongest.

“We retain our FY17 to FY19 earnings per share (EPS) forecasts and dividend discount model-based target price of RM1.71,” CIMB said in its note. Despite a 23.1% y-o-y fall in travel insurance gross premiums since the insurer switched to an opt-in function in July 2016, CIMB said it was positive on the new partnership with CAA, as this would be a new income stream for Tune.

UOB Kay Hian Research concurred with CIMB Research’s views and has kept a ‘buy’ rating on the stock, but reducing the target price to RM1.40, from RM1.70 previously.

The lower target price has been pegged to a lower price-to-earnings of 13.5 times to reflect the structural fall in take-up rates after the implementation of the “opt-in” policy for all travel insurance by the Malaysian Aviation Commission in August last year.

The house reckons that there could be a stronger recovery in the second half of this year, as new travel insurance bundling programmes with AirAsia Bhd take effect.

“This, coupled with the stock’s relatively attractive 1.30 times 2018 forecast price-tobook valuation versus the sector’s average of 2.0 times despite its return on equity of 12.9% being only marginally lower than the sector average of 13.5%, suggests that the market has priced in the expected softness in 2017 earnings,” the firm said.

The house thinks that the stock provides an attractive 5.2% yield. The company has also been consistently raising its absolute dividend payment per share payout since its listing.

Meanwhile, Affin Hwang Capital has maintained a ‘buy’ rating, but with a lower target price of RM1.15 from RM1.57 previously, stating that its second-quarter results were below the houses’ and consensus expectations. Tune Protect shares closed down one sen or 0.99% at RM1 yesterday, with 7.19 million shares being traded.