Tune Ins Holdings Bhd
(June 10, RM1.84)
Maintain add with unchanged target price of RM2.80: According to media reports, Tune Group is considering selling its shares in Tune Ins. It is still in the preliminary stages of a planned selldown of its shareholdings. Tune Group is the largest shareholder in Tune Ins with a 16.6% holding, worth about US$62 million (RM231.88 million).

We gather from our industry source that Tune Group plans to place out the shares to strategic shareholders, targeting the established international insurance companies. According to our source, Tune Group is not in a hurry to place out the shares and it will carefully select the parties that it will place the shares to. Any selldown by Tune Group of its stake in Tune Ins may not be as negative as it appears to be if it places out the shares to strategic shareholders, especially to the established international insurance groups.

If this is the case, there would not be a material overhang of Tune Ins shares in the market. Any entry of a strategic shareholder would help Tune to improve its operations in various areas, such as its information technology systems, marketing capabilities and so on.

Although Tune Ins has superior capabilities to market travel insurance products compared with its competitors, it is relatively less sophisticated in other classes of non-life insurance businesses, including motor, fire, as well as marine and aviation, than other more established insurers. So, any assistance from a strategic shareholder to improve its operations would be welcome. 

We advise investors to accumulate the stock as we see bright earnings prospects for the group’s travel insurance business and non-life insurance unit in Thailand. — CIMB Reseach, June 10

This article first appeared in The Edge Financial Daily, on June 11, 2015.