This article first appeared in The Edge Financial Daily on June 11, 2018
Tune Protect Group Bhd
(June 8, 84.5 sen)
Maintain buy with a fair value (FV) of RM1.10: We maintain our “buy” call on Tune Protect Group Bhd with an unchanged FV of RM1.10 per share, pegging the stock at a financial year ending Dec 31, 2019 (FY19) price-to-book ratio of 1.4 times.
The group has announced the subscription of a 9.99% equity stake in an insurance technology (insurtech) company known as Laka Ltd based in the UK.
Its wholly-owned subsidiary company, Tune Direct Ltd, has already executed a new subscription and shareholders’ agreement to take up the 9.99% stake for £499,478.07 (RM2.64 million). This amount will be settled through the group’s internal funds and will not have any impact on gearing.
Eventually, this will be treated as an investment in Tune Protect’s balance sheet. Hence, no impact is expected on the group’s profit and loss account unless the equity stake in Laka is raised to the level for it to become an associate company of Tune Protect. This transaction is expected to be completed within three months (by early September 2018).
Laka was incorporated on Jan 20, 2017, and registered in England and Wales. The company was founded by Tobias Taupitz, Jens Hartwig and Ben Allen — holding the largest shareholdings at 24.81%, 18.61% and 12.40% respectively. As an insurtech company, Laka offers non-conventional peer-to-peer insurance protection to members of a same community.
The rationale of this investment is to leverage the technology expertise of Laka and experience of its founders for Tune Protect to eventually become the leading digital insurer. Recall, the group aims to widen its distribution channels and reach for its insurance products digitally.
We make no changes to our earnings estimates as this transaction will be treated as an investment in the group’s balance sheet. We are seeing a recovery in the travel insurance business of Tune Protect which is a positive sign while the underwriting performance for its general insurance business has improved in the first quarter ended March 31, 2018. — AmInvestment Bank, June 8