Tune Ins -
Ahead Of Target
Our Strong BUY and MYR2.40 FV (22.0x FY14F EPS) on TIH are premised on: i) widening travel insurance margins, ii) market expansion, iii) turnaround of its general insurance subsidiary, and iv) tie-ups with more airlines and online providers. We continue to like its travel business, which is racing ahead of its minimum 20.0% growth target, and the industry’s 10.0-15.0% growth expectations.
- Travel insurance an untapped market. According to industry figures from Zurich Financial Services, Malaysia’s travel insurance market is largely untapped as the penetration rate is only 10.0%. This is in sharp contrast to the 80.0% in developed nations. Also, Malaysia’s travel insurance premiums have been growing at 15.0% a year versus the projected 10.0%-12.0% for the Asia Pacific over the next 5-7 years. The Asia Pacific travel insurance market, estimated at around USD2.8bn, constitutes about 28% of the global market size of USD10bn.
- TIH the only clear proxy to travel insurance. TIH is differentiated from other listed peers by way of its niche in online travel insurance. This is made possible via its exclusive partnership with shareholder AirAsia (AIRA MK, BUY, FV: MYR3.94). Its YTD online premiums have surged 38.2%, propelled by a 24.0% growth in policy count. This is surpasses its minimum 20.0% growth target, which by itself is already above the industry’s 15.0% pace. We are bullish on the outlook for TIH’s online premiums as we expect 2H to be stronger period, further supported by ongoing market expansion (18 markets from 16), and AirAsia’s growth in passenger numbers.
- Premium well-deserved. We maintain our BUY call on TIH, with an unchanged FV of MYR2.40, pegged to 22.0x FY14 EPS. This is at a premium to the target P/Es of 14.0x-19.6x we have ascribed to its peers. We deem TIH a growth stock, for which we are projecting EPS growth of 29.0%-32.0% over the next two years vs 5.0%-17.1% for its peers. The move by Thailand - one of its key markets - to impose mandatory travel insurance could boost TIH’s FV to MYR2.65 (please see Page 2 for our revised scenario). Other further potential enhancements to our projections include the potential of AirAsia India, whose contribution we have not fully accounted for.
Publish date: 30/09/13