Our  Strong  BUY  and  MYR2.40  FV  (22.0x  FY14F  EPS)  on  TIH  are premised  on:  i)  widening  travel  insurance  margins,  ii)  market expansion,  iii)  turnaround  of  its  general  insurance  subsidiary,  and  iv) tie-ups with more  airlines  and  online  providers. We  continue  to  like  its travel  business,  which  is  racing  ahead  of  its  minimum  20.0%  growth target, and the industry’s 10.0-15.0% growth expectations.

- Travel  insurance  an  untapped  market.  According  to  industry  figures from  Zurich  Financial  Services,  Malaysia’s  travel  insurance  market  is largely  untapped as the  penetration rate  is only  10.0%.  This  is  in  sharp contrast  to  the  80.0%  in  developed  nations.  Also,  Malaysia’s  travel insurance  premiums  have  been  growing  at  15.0%  a  year  versus  the projected 10.0%-12.0% for the Asia Pacific over the next 5-7 years. The Asia  Pacific  travel  insurance  market,  estimated  at  around  USD2.8bn, constitutes about 28% of the global market size of USD10bn.  

- TIH the only clear proxy to travel insurance. TIH is differentiated from other  listed  peers  by  way  of  its  niche  in  online  travel  insurance.  This  is made  possible  via  its  exclusive  partnership  with  shareholder  AirAsia (AIRA  MK,  BUY,  FV:  MYR3.94).  Its  YTD  online  premiums  have  surged 38.2%, propelled by a 24.0% growth in policy count. This is surpasses its minimum  20.0%  growth  target,  which  by  itself  is  already  above  the industry’s 15.0%  pace.  We  are bullish on the outlook for TIH’s  online premiums  as  we  expect  2H  to  be  stronger  period,  further  supported  by ongoing market expansion (18 markets from 16), and AirAsia’s growth in passenger numbers.

- Premium  well-deserved.  We  maintain  our  BUY  call  on  TIH,  with  an unchanged  FV  of  MYR2.40,  pegged  to  22.0x  FY14  EPS.  This  is  at  a premium to the target P/Es of 14.0x-19.6x we have ascribed to its peers. We deem TIH a growth stock, for which we are projecting EPS growth of 29.0%-32.0% over the next two years vs 5.0%-17.1% for its peers. The move by Thailand - one of its key markets - to impose mandatory travel insurance could boost TIH’s FV to MYR2.65 (please see Page 2 for our revised  scenario).  Other  further  potential  enhancements  to  our projections include  the  potential  of  AirAsia  India,  whose  contribution  we have not fully accounted for.

Source: RHB