Review

• Tune Protect Group Berhad's 9M24 net loss of RM7.4mn was below our expectations, considering our full-year net profit forecast of RM25.6mn. The negative variance was mainly due to 3 large fire losses and impairment losses.

• 9M24 LBT stood at RM5.0mn (vs. PBT of RM25.8mn in 9M23) mainly due to i) three significant fire losses of RM5.1mn, ii) impairment losses on intangible assets of RM3.0mn, iii) impairment-related to claims recovery of RM4.9mn and iv) forex losses of RM3.5mn.

• Positively, Tune's 3Q24 PBT improved to RM9.3mn from a loss before tax of RM10.3mn in 2Q24. The better performance was driven by higher insurance revenue of 5.0% QoQ to RM100.2mn due to better contributions from the travel segment, particularly AirAsia and Middle East.

• More importantly, the group achieved a positive underwriting result of RM6.1mn in 3Q24 compared to an underwriting loss of RM4.9mn in 2Q24), driven by better expense management and improved claims experience. Overall, the 3Q24 combined ratio improved to 93.9% (vs. 105.2% in 2Q24).

Impact

• We cut FY24 earnings forecasts to RM1.6mn (vs. 25.6mn previously) after increasing our combined ratio to by 2.8 pts to 97.1% and factoring in a lower share of results of Tune Protect Thailand. No change to FY25-26 earnings estimates.

Outlook

• We believe that the group will achieve a better 4Q24 performance, driven by the year-end peak travel period and cost discipline efforts. The take-up rate is expected to increase further via existing distribution channels, travel gadgets and B2B partnerships. Additionally, the group has launched a new partnership with a credit card provider in Thailand, offering a travel product as a cardholder privilege. Overall, we expect the combined ratio to improve with the growing travel mix in its portfolio.

• As for its motor segment, Tune Protect targets to improve the loss ratio by focusing on key distribution channels and higher average premiums. We understand that average premiums are gradually rising following the repricing in July 2024, which is expected to have a favourable impact on the overall motor claims ratio next year.

Valuation

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

Source: TA Research - 26 Nov 2024