Stock Focus Tune Ins going places

by **Cals** Mon 21 Apr 2014, 19:58

Stock Focus Tune Ins going places

Business & Markets 2014

Written by Esther Lee of theedgemalaysia.com

Monday, 21 April 2014 18:13

THESE days, it is difficult to get hold of Tune Ins Holdings Bhd (TIHB) CEO Peter Miller. It is no wonder why — the insurance group is going beyond Malaysian waters.

But it is not stopping yet. Miller says during an interview with The Edge that TIHB plans to tie up with at least one more airline company this year on top of its recent tie-up with Cebu Pacific Air of the Philippines.

As for its Indonesian acquisition plan that fell through last year, he says the group is currently working on “Plan B” and hopes to seal the deal this year. TIHB is already in talks for a new partnership, in which it is seeking a majority stake.

Recently, TIHB announced that it had received approval from the Office of Insurance Commission, Thailand, for its proposed acquisition of a 49% stake in Osotspa Insurance, a non-life insurance company in Thailand.

Analysts consider this as a win for THIB, considering that Thailand represents one of AirAsia’s fastest growing markets. TIHB is expected to ride on AirAsia’s fast-growing passenger growth, given its exclusive partnership with the low-cost carrier.

Analysts view the developments in Thailand and Indonesia as a positive move as having local insurance licences in the two countries will allow TIHB to underwrite the travel insurance business directly instead of relying on insurance partners.

Miller says he is expecting the Thailand partnership to contribute to the group’s bottom line in the first year of operations.

TIHB’s recent joint venture with Dubai-based Cozmo Travel LLC to offer travel insurance in that region is another interesting deal. The partnership is set to start operations soon. Miller says this was one venture that the group did not foresee when it went public last year.

The joint venture, he says, will give TIHB access to air travellers from the Middle East, Europe and even North Africa. Its ties with Cozmo will also provide the group the leverage it needs to build on the fast-growing Middle Eastern market, which is brimming with potential opportunities.

“If I say I have a presence in Dubai from an existing partnership with a well-known entity that is growing quickly, it will give me a much better position to negotiate with other potential businesses. We look at this joint venture as a foundation for building a business in the Middle East that is initially centred on travel insurance but could potentially grow outside of that,” says Miller.

Nonetheless, the competition in Dubai is stiff. Many insurance companies from India and Europe, geographically closer to Dubai, have already made their move into the city where 80% of the residents are expatriates.

For now, the TIHB-Cozmo partnership will be working closely with travel agencies as opposed to the online model TIHB is known for as most transactions in Dubai are still done the traditional way, that is, over the counter. But Miller believes that the online trend will catch on in the country, although it may take time.

Meanwhile, the group is also looking to roll out its online general insurance platform next month. According to Miller, this platform will start by offering simple insurance products.

He says the initial target market will be the Gen Y, given that Malaysia has one of the fastest growing young populations in the world. But this could move on to the older generation as studies have shown that the young influence the buying behaviour of their parents.

“Initially, the target may be the younger ones, but if the proposition is good, the young population will say to their parents and friends, ‘Buy it!’ With the right proposition, we can get a broad range of the population.”

Within a year, TIHB’s share price has gained 52.45% to RM2.18 at April 11’s close from RM1.43. Bloomberg data shows that analysts are generally positive about the share with five “buy” calls and one “sell” recommendation. The target price ranges from RM2.31 to RM2.55. At the highest target price of RM2.55, the share has an upside potential of 17%, based on the price of RM1.43.

TIHB’s net profit for the financial year ended Dec 31, 2013, rose nearly 66% to RM68.57 million from RM41.39 million previously while revenue was up 71.9% at RM389.63 million. TIHB attributed the higher profit to the increase in its general reinsurance business which contributed to the growth in gross earned premiums.

RHB Research, which has a fair value of RM2.40 on the stock, says in its research report that it likes TIHB for its regional exposure and profitable travel insurance business.

Currently, THIB trades at 22.93 times price-earnings ratio (PER), the most expensive in the industry. The current PERs for industry peers range from 7.09 times (Allianz Malaysia Bhd) to 17.95 times (LPI Capital Bhd).

THIB’s share price may look expensive in terms of PER, but some analysts reckon that the current price has yet to capture the growth potential abroad.

This article first appeared in The Edge Malaysia Weekly, on April 14, 2014.