Open the gate. Being the market leader in travel insurance in Thailand and strong presence in Malaysia, Vietnam and the Middle East, we believe TUNEPRO will continue to capitalize on the recovery of domestic and international travel, in light of the reopening of international borders and in anticipation of the pent-up demand for travel insurance, to cover COVID-19 calamities. As such, we reckon TUNEPRO is well positioned to ride on the growing travel insurance demand owing to its strong presence in ASEAN and Middle East coupled with the right insurance product segmentations (Covid Plus and Covid Lite plans). This huge market potential is further growth with some countries mandating travel insurance for visiting foreigners (source).

After tumbling 36.4% from a 52-week high at RM0.53 to 52-week low of RM0.34 yesterday, TUNEPRO is currently trading at 5.7x FY23E P/E (-48% vs 5Y average P/E of 11x and -62% against peers) and 0.45x P/B (-55% against 5-year average of 1.0x and 56% vs peers), also supported with an attractive 5.9% FY23E dividend yield. In wake of the share price slump along with recovery prospects turning brighter, we opine the risk and reward for TUNEPRO has turned favourable for long term investors to nibble.

Will the recent flood impact TUNEPRO? The recent flash floods in Klang Valley (source) will likely lead to a higher claim rate in TUNEPRO. However, we note that the impact to TUNEPRO is minor as the group have low exposure in flood cover, with only 0.6% and 7% of its motor policies and non-motor policies have flood cover (versus 4% and 30% in industry). In 4QFY21, the flood claim has a net impact to PBT of RM3.6m with TUNEPRO’s FY21 net claim incurred ratio (NCI) still significantly lower than industry (19.3% versus 49.9%). Also, we believe the market had largely priced in the negative impact from the flash floods, judging from the 20% share price correction YTD.

Grossly oversold; Buy the dip. Following the recent 20% slide in share price YTD, TUNEPRO is currently grossly oversold and trading near its long-term support of RM0.325. A successful rebound above RM0.385 will spur the prices toward RM0.425- 0.460 levels. Cut lost at RM0.295.

Source: Hong Leong Investment Bank Research - 17 Mar 2022