KUALA LUMPUR (Jan 26): Tune Protect Group Bhd addressed concerns raised by investors regarding its reliance on AirAsia Group Bhd’s business, with the group pointing out that its business with the low-cost carrier accounts for 3% to 4% of its topline.

During a Wednesday (Jan 26) briefing on Tune Protect’s outlook, group chief executive officer Rohit Chandrasekharan Nambiar (pictured) made several points to dispel concerns over the impact that AirAsia’s business may have on the group’s performance going forward.

“Firstly, AirAsia owns a little more than 13% of this organisation through AirAsia Digital. Secondly, AirAsia’s outstanding payments with us is at a very healthy level and they have been paying,” he said.

Referring to comments that AirAsia’s business “makes or breaks” Tune Protect, Nambiar pointed out that the group has been building its business in the Middle East, Vietnam, Cambodia and has also undertaken many partnerships, tying up with 44 new partners in 2021.

He highlighted that the travel business was already declining pre-Covid-19, marking a 16% decline in 2019 and subsequently “fell off the cliff” in 2020 due to the pandemic, as AirAsia halted operations.

"AirAsia’s contribution today is less than 6% of our travel, which is a little more than 50% of our entire business. That translates to AirAsia accounting for 3% to 4% of our topline."

“I look at it as a massive opportunity because we know AirAsia is going to come back. This number will grow, and when it does, it will add on to these new businesses that we have,” he explained.

Asked if the Middle Eastern segment is sustainable, given the weaker performance in the recent quarter, Nambiar said it is very much sustainable as the group does not rely on a single partner and has tied up with Air Arabia and Salam Air, for example.

He added that over 1,000 travel agencies in the region are using Tune Protect’s business-to-business platform and are selling the group’s products.

On the weak performance of the Middle East segment in its recent quarter, he said that there were months when people travel to the region, while other months are slower, such as during Ramadhan for example.

He also pointed to the fears arising from spikes in Covid-19 infections as a factor, although he said there should be more consistency in 2022 as fears subside.

Besides the Middle East, the group is also looking at new markets such as Eastern Europe, which Nambiar said Tune Protect is aggressively pursuing.

Meanwhile, the group is also eyeing to expand its operations in Indonesia and Vietnam as it seeks to tap the rising mobile penetration rate in these countries via its proprietary mobile app.

Nambiar highlighted several trends that could pick up in 2022 which the group could capitalise on, including the simplification of travel restrictions, vaccine passports, mandatory insurance coverage and pent-up travel demand, which opens up opportunities in trip cancellation insurance, Covid-19 coverage and trip delay benefits.

He added that Tune Protect is also looking at e-commerce amid the pandemic-induced digital acceleration, which could allow the group to engage in more partnerships, as well as products related to the gig economy.

He also noted that the group is hoping to capitalise on technology trends such as hyper-personalisation, protection against data theft, identity fraud, and the rise of hacks and phishing attacks, he said.

By 2023, Nambiar said Tune Protect aims to achieve a 25% to 33% compounded annual growth rate for its total net premiums written (NWP), which stood at RM145.5 million as at the end of the third quarter of 2021.

He expects the health industry and small and medium enterprises to be critical drivers of its growth going forward, expecting these two segments each to make up about 15% of NWP, while the lifestyle segment will continue to be the largest premium contributor, making up the major 70%.

For the nine months ended Sept 30, 2021, Tune Protect posted a net loss of RM2.86 million, amid lower investment income under its general insurance business, after posting a net profit of RM18.39 million for FY20 and RM50.68 million for FY19.

According to Bloomberg data, all three analysts covering Tune Protect have the counter on “buy”, with an average target price of 53 sen.

Bloomberg’s estimates forecast the group will register a net profit of RM9.3 million for FY21 and RM26.5 million for FY22.

Tune Protect's share price closed one sen or 2.5% higher at 40.5 sen on Wednesday, giving it a market capitalisation of RM304.46 million.