Ins Holdings (TIH)’s 1QFY13 core results were in line with expectations, accounting for 26.2% of our and 24.9% of consensus full-year forecasts. Its online and reinsurance business performed well on the back of a seasonal high in travel demand. While we make no changes to our forecasts and FV, we are downgrading the stock to a NEUTRAL given its recent steep share price appreciation.

Online business provides strong start to 2013. TIH posted total core earnings of MYR16.0m for 1Q13, excluding MYR2m-MYR3m in finance costs and listing expenses. Its online and reinsurance business grew 33.7% y-o-y and 12.1% q-o-q and recorded gross earned premiums (GEP) of MYR22.2m. Management explained that 1Q and 4Q were historically stronger quarters for online travel insurance.

Stronger outlook for online premiums. Although the online segmental GEP was only within 22%-23% of our full FY13 segmental forecast, and seems contradictory to our earlier statement of seasonality, this was nevertheless within our expectations. TIH now provides travel insurance to passengers from Myanmar, effective from this month, and also stands to benefit from AirAsia (BUY, FV: MYR3.39)’s businesses in India and Philippines. The acquisition of Indonesian insurer PT Batavia Mitratama Insurance will also increase the Group’s retention of its online premiums. Our forecasts take into consideration that its online travel insurance business will only improve in the coming quarters.

TIMB’s performance within expectations. The Group’s non-online general business, operated by Tune Insurance Malaysia (TIMB), recorded GEP of MYR69.1m, which accounted for 24%-25% of our FY13 segmental forecast. While 1QFY13 Group PBT seemed 34% lower than 4QFY12, this was due to a MYR10m one-off release of a technical provision back in 4QFY12 from improved loss ratios in TIMB.

Downgrade to NEUTRAL. We make no changes to our forecasts, as there were no surprises in the results and we have taken into account all foreseeable catalysts in our current FV (pegged to 20x FY14 EPS). Given the recent surge in its share price, we downgrade our call to NEUTRAL.

Source: RHB