Review

• Tune Protect Group Berhad's posted 1H24 net loss of RM13.3mn (vs. our full-year net profit forecasts of RM25.6mn). We deem the result to be within expectations as we expect the group to turn around in 2H24.

• YoY, the group reported LBT of RM10.3mn in 2Q24 (vs. PBT of RM13.0mn in 2Q23) mainly due to: i) earnings of RM6.8mn from Perlindungan Tenang Vouchers in 2Q23, ii) two fire losses incurred in 2Q24 of RM3.9mn, iii) impairment losses of claims recovery of RM4.9mn and iv) impairment losses on intangible assets of RM3.0mn.

• Consequently, Tune’s combined ratio increased by 9.9 pts to 105.2% due to higher net incurred claims, higher attributable expense ratio and acquisition cost ratio.

• QoQ, 2Q24 results from net insurance services improved by RM6.4mn driven by improvement in net incurred claims and expenses, arising from improved cost efficiency.

Impact

• No change to our earnings estimates.

Outlook

• Moving into 2H24, the group is reprioritising its efforts with an emphasis on profitable growth, cross-regional business and regional travel ecosystem. This would allow Tune Protect to improve cost efficiency and provide a one-stop service from tech to reinsurance.

• As for travel, management would focus on increasing take-up rates via existing distribution channels and targeting regional players in areas such as travel agencies, hotel chains and cruises. With that, we expect the combined ratio to improve with the growing travel mix in its portfolio.

• For the motor segment, we gathered that Tune Protect has repriced premium upwards by about 4% for the private car comprehensive segment, beginning July 2024.

Valuation

• We reiterate our Buy recommendation on the stock with an unchanged TP of RM0.48/share based on 0.6x CY25 PB.

Source: TA Research - 29 Aug 2024