Corporate  |  FEBRUARY 8, 2013 10:30AM

Lukewarm Response for Tune Ins IPO

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tony-fernandesFirst at RM1.55 now at RM1.35. This could be a sign of lukewarm responses by institutional shareholders to Tune Ins Holdings Berhad (TIH)’s Initial Public Offer (IPO), said analysts.

The much awaited listing and the reduction in the IPO price has turned many heads and some say it is the highest bid by the buyers themselves. Adjusting prices closer to what the market will bear will help prevent wild fluctuations in share prices, analysts added.

Edmund Tham, an analyst at Mercury Securities, said the price depends on the demand from buyers.

Other analysts said that it may not be the right time to list a company’s share because of the general elections which is said to be around the corner. Buyers may be apprehensive about purchasing shares now as the market is likely to move down on uncertainty.

Tham said the time of the listing would have been planned a while ago, and the company would have been aware of the situations that may influence the performance of the IPO.

Another analyst added, AirAsia’s major shareholders Tony Fernandes and Kamarudin Meranun may establish a different market segment, unlocking the value of online business insurance. Being affiliated with Asia’s biggest budget airlines itself holds the possibility of attracing more buyers of share than expected.

Analysts had said earlier risks involving TIH would be the pending implementation of customer protection and data privacy laws, and rules and regulations in geographical markets. Regulatory change could mean restriction to customer data and more protocols to adhere to.

At the new issue price of RM1.35 a share and a forecast earnings per share of 7.0 sen for 2013, the price earnings ratio 19.3X. The analysts said earnings were steady over the past three years and this is expected to continue because of the affiliation with AirAsia to which they provide travelers’ insurance.

TIH’s Net Profit After Tax (NPAT) has grown at a Compound Annual Growth Rate (CAGR) of 20.6 percent. The newly acquired Tune Insurance Malaysia Berhad (TIMB) formerly known as Oriental Capital Assurance (OCA) has recorded a CAGR of 45.1 percent for NPAT over the last three years.

TIH offered 66.85mil under the institutional offering and 41.35mil under the retail offering.

The bulk of the funds raised from the IPO would be used to settle term loans that financed the acquisition of TIMB amounting to RM133.0mil (59.86 percent). And the remainder would be utilized in these areas : working capital (12.24 percent), strategic investments(22.5 percent) and listings expenses(5.4 percent).

TIH is a direct underwriter for online insurance and general insurance for the Asia-Pacific Region in partnership with AirAsia.

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