Sunday, December 15, 2013

Tune Ins : Spreading its wings in 2014 (CIMB)

Tune Ins Holdings Bhd
Current RM1.89
Target RM2.55
Spreading its wings in 2014

The key initiative in 2014 will still be the regional expansion of its travel insurance (TI) business through AirAsia and new tie-ups with other airlines. Locally, it will be focussing on transforming its non-life entity to enhance its underwriting margins.

We retain our DDM-based target price (cost of equity of 9.2%; long-term growth of 5%). Under our revised rating structure, our recommendation changes from Outperform to Add. The potential re-rating catalysts are (1) swift expansion in travel insurance, (2) EPS-accretive M&A in Indonesia, and (3) improving underwriting margins for the non-life business in Malaysia.

What is in store for 2014?
The key positive developments in 2014 will be – (1) increase in overseas contributions for the travel insurance business from existing and new markets (like India), (2) potential M&A in Thailand after completing the one in Indonesia, (3) increase in the contributions from its tie-up with Cebu Air, and (4) the sale of more non-life products through the Internet. Also, it is scouting for new tie-ups with other airlines. This will be a catalyst if it materialises as it will provide another avenue for revenue generation.

Projecting 16% earnings growth
Based on our forecasts, Tune will record a healthy net profit growth of 15.8% in FY14 on the back of a 10.1% rise in gross premium. The premium growth will be strong at a projected 18% for the travel insurance business compared to 8% for the non-life unit in Malaysia. Another driver will be the expected drop in claims ratio from 38.4% in FY13 to 36.2% in FY14 with the increase in the travel insurance component, which attracts a claims ratio of only circa 3%.

A niche player in travel insurance
We advise investors to accumulate Tune Ins as it is a niche player in the travel insurance segment, which offers good growth prospects and lucrative margins of 50%+. Its main strength is its tie-up with AirAsia, the leading low-cost carrier in Asia, which is not easily replicated.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 10/12/13

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