KUALA LUMPUR: CIMB Equities Research envisages better earnings for Tune Insurance in the second half of 2015, especially in the 4Q15, as air travel is likely to pick up towards year-end.
“However, the trend in 3Q15 is expected to be volatile, given the regional economic slowdown and the currency devaluation of certain countries,” it said on Wednesday.
CIMB Research said Tune’s 1HFY15 net profit was below expectations at only 40% of its full-year forecast and 41% of consensus due to higher-than-expected net claims and expenses.
“Raising the gross claims by about 5% leads to a 5-6% drop in our FY15-17 EPS forecasts and DDM-based target price (COE of 9.2%; LT growth of 5%),” it said.
The research house said despite the weaker-than-expected 1H15 earnings, Tune Ins remains an Add and its top pick for the sector in anticipation of strong earnings in 2H15.
“All the longer-term re-rating catalysts are intact, including the bright prospects for the travel insurance (TI) business in the region and its non-life insurance unit in Thailand, as well as more tie-ups with other airlines,” it said.
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