We still see strong earnings growth for  Tune Ins Holdings (TIH), whose shares  have  rallied  sharply  in  the  past  5  market  days.  The group’s re-rating  catalysts  in  its  overseas  acquisitions  have  begun  to  materialize but  we  believe  the  upside  has  been  priced  in.  At  this  juncture,  we  are nudging  up  our  FY14  EPS  by  4%  in  view  of  the  visible  incremental earnings from its Indonesia unit. Maintain BUY, with a new MYR2.05 FV, pegged to a 20x on FY14 EPS.  

-  Share  price  run-up.  TIH’s share price has  surged  by  26%  in  the  past five  market  days,  spurred  by  what  we  believe  to  be  heightened  investor interest  on  and  the  pricing  in  of  its  overseas  acquisitions  into  its.  At yesterday’s closing price,  TIH  was  trading  at  4.2x  FY13  P/NTA  and  a 22.6x FY13 P/E. This has compressed its dividend yield to <2%. 

-  4% EPS upside adjustment. As the Indonesian subsidiary TIH acquired is  expected  to  contribute  to  full-year  FY14  earnings,  we  incorporate  an incremental premium of 5% in the group’s online business for FY14. This will  translate  into  a  4%  EPS  accretion.  The  incremental  premium/net profit for the online business is based on our assumptions below:

o  Indonesia contributes 15% of all travel policies in FY14 (FY12:13%). 
o  TIH  keeps  25%  of  the  online  premiums  it  shares  with  its  Indon partner, assuming it fully underwrites the unit’s travel business. 
o  Retention  and  expenses  ratios  unchanged;  hence  a  50%  profit margin

-  Revising  FV  to  MYR2.05.  We  lift  our  FV  by  17.1%  to  MYR2.05  from MYR1.75  previously  on  revising:  (i)  FY14  EPS  by  4%  to  MYR0.10,  and (ii) a higher P/R of 20x from 18x before, due to a sector rerating and the revision in TIH’s EPS growth. We  have  yet  to  include  its  profits  from  its subsidiary’s  non-online  general  insurance  business  pending  more visibility.  Incorporating  this  unit’s  MYR1.87m  earnings  (assuming  no growth from FY12) would lift our adjusted FY14 EPS to 5.8% and FV to MYR2.12.  Maintain  BUY,  but  we  advise  investors  to  buy  on  a  price correction since the upside has been partly priced in. 

Source: RHB