22 February 2013

Why TUNE INSURANCE is Out of Tune?

Every wonder why we didn't cover the IPO for Tune Ins ? Other than CNY mood, it's because of the unexciting part of this new stock. Why? Please read on...

Tune Ins Holdings Sdn Bhd (TIH) operates 2 core businesses. First, it provides online insurance where insurance products are sold as part of the customer’s online booking process with their partners namely AirAsia, Tune Hotels and AirAsia Expedia. TIH also operates a general insurance business, through 83.26% owned subsidiary - TIMB.

Why invest in Tune Insurance Holdings?

  1. Wide and cost effective distribution channels
  2. Provide ease in buying coverage
  3. Exclusive partnership with AirAsia
  4. Ability to ride on AirAsia’s robust growth
  5. Additional revenue and cost synergies from TIMB
  6. Robust industry prospects

However, some of the above investing reasons had also became the disadvantages of TIH. It's reliant on AirAsia business is too important. TIH's success is very much depends on the success of AirAsia businesses, and because of its relationship with AirAsia, TIH would face difficulties in forging a partnership with other airline.

Meanwhile, for TIH domestic general insurance, stiff competition and the implementation of tighter capital requirement for insurance companies may affect its operations. It's in the industry where size does matter. I don't think TIH can cross-sell it's online clients easily on other general insurance, such as fire and car insurance.

Forecast and Valuation given by TA Securities Research
Going forward, we believe TIH’s gross earned premiums will be closely linked to increase in passengers carried on AirAsia. We estimate AirAsia’s passengers carried to increase at an encouraging pace of around 15% per annum. Tagging a 20% to industry’s targeted PER of 10x, we fairly value TIH at RM1.00.

Fair Value RM 1.00 ???
Hey dude, the IPO price is RM1.35 !!!

1 comment:

  1. Thanks for the information, it's good to be secure our health, car and home with the general insurance. general insurance is very important to invest for safety of belongings.


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