We retain our BUY call on Tune Ins with a revised MYR2.00 TP (53% upside). 2Q15 results broadly met estimates, aided by normalising topline performance and better UW margin from TIMB. The travel business, however, was hampered by higher business development costs. This should level off next year and together with new product launches, 2016 earnings momentum is poised to accelerate again.

2Q results broadly in line. 2Q15 net profit of MYR16m (+13% YoY, -2% QoQ) was broadly in line with our and consensus expectations , with 1H15 net profit of MYR33m (+12% YoY, ex-gains from sale of Tune Insurance Malaysia (TIMB) building) accounting for 43% of our and 41% of consensus full-year estimates. 2H tends to be a seasonally stronger period for the group.

2Q15 pre-tax profit up 7% QoQ (+17% YoY). This was underpinned by: i) 8% QoQ (+18% YoY) rise in net earned premium (NEP) thanks mainly to TIMB. Recall that TIMB recorded slower general insurance (GI) growth in 1Q15 due to some policies being issued on shorter-term tenure ahead of the goods and services tax (GST). The remaining tenure was issued to corporate clients after Apr 2015, hence normalising the gross premium trend, and ii) better underwriting (UW) margin of 16% (1Q15: 14%) with GI’s UW margin improving to 9% in 2Q15 vs -4% in 1Q15. NEP for the travel business rose 2% QoQ but net profit fell 7% QoQ due to higher commission and management expenses.

Briefing highlights. Management was optimistic on achieving doubledigit topline growth in 2H15, driven by both the travel business and TIMB. Tune Ins highlighted that management expenses this year would be elevated due to marketing expenses for its digital business and branding, but this should level off from 2016. Recent events such as the Bali flight disruptions present opportunities for Tune Ins to educate travellers on the value of insurance. Finally, management thinks the MYR depreciation should be positive for inbound tourism and domestic travels.

Forecasts. We tweaked down our 2015-2017 net profit projections by 3-5% to account for higher management expenses.

Investment case. We lower our TP to MYR2.00 (from MYR2.30) following the changes to earnings above and after ascribing a lower target 2016 P/E of 18x (from 19x P/E) to take into account the slower earnings growth we now project and higher market risk premium. Our revised target P/E is at 1SD below the stock’s average P/E since listing . We expect Tune Ins’ earnings momentum to accelerate again next year, underpinned by new partnerships (airline and non-airline) and products. Maintain BUY.