KUALA LUMPUR: Tune Protect Group Bhd is expected to see strong earnings recovery on the back of improved product mix, aggressive launching of new products and healthy balance sheet.
Rakuten Trade Research Sdn Bhd expects Tune Protect to post a net profit of RM18.5mil and RM50.8mil for financial years ending Dec 31, 2021 (FY21) and FY22, respectively, following the relaxation of standard operating procedures and the uplift of travel restrictions worldwide.
For the second quarter (Q2) ended June 30, Tune Protect recorded a net profit of RM14.25mil from RM12.6mil a year ago.
Meanwhile, the research firm said revenue contribution from its commercial business, which gives lower retention rate to the group, is likely to reduce, and in turn, would improve the product mix of the group.
To drive future growth of the group, Tune Protect is banking on its three core pillars which are health, lifestyle as well as small and medium enterprises (SMEs).
Tune Protect offers an array of affordable protection plans to suit individual, SMEs and corporate needs through its insurance, reinsurance and marketing arms in Malaysia, Thailand and the United Arab Emirates.
It is worth noting that revenue contribution from its partner, AirAsia Group Bhd, was affected when the movement control order restrictions were imposed since the first quarter of last year.
However, Rakuten Trade Research said Tune Protect has remained resilient in weathering the challenges by tapping into Covid-19 coverage insurance in Middle Eastern countries.
This is because insurance has become compulsory for travellers in the Middle Eastern countries who are flying to countries like Thailand and Singapore.
As such, the research firm added that the take-up rate of its travel insurance has increased tremendously compared to pre-Covid-19 levels.
As more countries are eyeing to open up for international travelling including Malaysia, Rakuten Trade Research noted that there is a huge market potential for Tune Protect to replicate similar business models and propositions across multiple markets especially via Airasia Group, which will incur lower commission.
“The management also believes that the healthy/low claims ratio to sustain as they are focusing on launching more products of the health and lifestyle segments especially Covid-19 related insurance and motor insurance which have lower claim ratio,” it added.
In the first half ended June 30, the group had a healthy balance sheet with no borrowings and a net cash position of RM11.1mil.
Having said that, Rakuten Trade Research is keeping a “buy” call on Tune Protect with a target price of.60 sen based on 0.7 times price-to-book value based on FY22, implying 9.8 times price-to-earnings ratio for FY22.
“Our buy recommendation is premised on strong earnings recovery, improved product mix with higher retention ratio, aggressive launching of new products and healthy balance sheet,” it said.