Tune Protect Group Bhd (Tune Protect) is a financial holding company that underwrites and reinsures non-life insurance products. Following the relaxation of SOP and gradual uplift of travelling restriction worldwide, we expect Tune Protect to register net profit of RM18.5m and RM50.8m for FY21 and FY22 respectively. BUY with a target price of RM0.60 based on 0.7x FY22 P/B, implying 9.8x FY22 PER. Our buy recommendation is premised on: (i) strong earnings recovery; (ii) improved product mix with higher retention ratio; (iii) aggressive launching of new products; and (iv) healthy balance sheet.

Tune Protect offers an array of affordable protection plans to suit individual, Small and Medium Enterprise (“SME”) and corporate needs via its insurance, reinsurance and marketing arms in Malaysia, Thailand and the United Arab Emirates. It has established a strong foothold in the travel, lifestyle, health and digital insurance space globally with presence across more than 60 countries through strategic partnerships with local underwriters in these markets.

Tune Protect is banking on its 3 core business pillars which are Health, Lifestyle, as well as SME to drive future growth. Hence, revenue contribution from its commercial business (which gives lower retention rate to the Group) is expected to reduce. This will improve product mix of the Group.

When Movement Control Orders was imposed since 1QFY20, revenue contributions from its partner, Airasia Group Bhd has been impacted. However, Tune Protect stays resilient in weathering the challenges by tapping into offerings of Covid-19 coverage insurance in Middle Eastern countries. As insurance has been made mandatory for travellers in Middle East countries who wish to fly to countries such as Thailand and Singapore, the take-up rate of its travel insurance has increased tremendously as compared to that of pre Covid-19.

Going forward, with the view that more countries might open for international travelling including Malaysia, there is a huge market potential for Tune Protect to replicate similar business model and propositions across multiple geographies/market especially via Airasia Group Bhd which will incur lower commission. The management also believes that the healthy/low claims ratio to sustain as they are focusing on launching more products of the Health and Lifestyle segments especially Covid-19 related insurance and motor insurance which have lower claim ratio.

The company also has a healthy balance sheet with no borrowings and a net cash position of RM11.1m as at 1HFY21.

Source: Rakuten Research - 13 Oct 2021