• We maintain our HOLD call on Tune Protect Group (TPG) with an unchanged fair value of RM0.62/share pegging the stock to FY20 P/BV of 0.8x, supported by an ROE of 9.3%.
• The group announced that its wholly-owned subsidiary, Tune Direct Ltd (TDL) has entered into an S&P agreement with LocalGlobe X, L.P (LocalGlobe) and Creandum V, L.P (Creandum) (collectively, the buyers) to dispose of its entire 9.99% stake in Laka Ltd (Laka) based in the UK.

• The rationale for the disposal of its investment in Laka was to enable it to utilise the sales proceeds to strengthen its own digital and technological capabilities.

• Its shareholdings in Laka will be sold to LocalGlobe and Creandum for £555,369.36 or RM3mil based on an exchange rate of £1: RM5.40. The selling price was derived on a willing-buyer-willing-seller basis.

• Recall in June 2018, the group announced its acquisition of a 9.99% stake in Laka, an insurtech startup company which operates on a crowd insurance model to rival traditional premiums. Laka offers non-conventional peer-to-peer protection to members of a same community. The intention of TPG investing was to leverage the technological expertise of Laka to support its aspirations to become a leading digital insurer. The total cost for the investment back in 2018 was £499,478.07 or RM2.67mil and it was funded internally.

• With a selling price of circa RM3mil, an estimated one-off gain of RM0.3mil is expected to be recognised in the group’s upcoming 1Q20 results which are trivial in our opinion. The transaction is expected to be completed by 31 March 2020.

• The disposal of its investment in Laka is not expected to impact the group’s core earnings. Hence, we are leaving our net profit estimates unchanged.

Source: AmInvest Research - 10 Jan 2020