This article first appeared in The Edge Financial Daily on August 15, 2018

Tune Protect Group Bhd
(Aug 14, 94.5 sen)
Maintain buy with a higher target price of RM1.20: Compared with financial year 2017 (FY17), which saw Tune Protect Group Bhd’s core net profit suffered a 40% decline year-on-year arising from high motor claims liabilities, adverse effects of “opt-in” regulatory changes and higher marketing expenses, we believe that the FY18 to FY20 period will potentially be recovery years.

This will likely be driven by new partnerships and developments of new digital platforms, coupled with product innovations and introductions, cost-control measures, more digital initiatives and expansion of the company’s presence into other countries.

We raise our net profit forecasts for FY18/FY19/FY20 by +7%/+20.8%/+22.7%. Though there were top-line revisions of gross written premiums and net earned premiums, a lower net claims ratio and a lower commission ratio were the key drivers of our earnings revisions.

The Dynamic Pricing 2.0 with “artificial intelligence” features (to identify specific needs based on age, medical history and so on) is expected to be integrated seamlessly into AirAsia’s website, expected by end-2018.

Key downside risks include a sustained decline in its travel insurance segment and a sticky motor claims ratio. — Affin Hwang Capital, Aug 14