AMINVESTMENT Bank maintains its hold call on Tune Protect Group Bhd (TPG) with an unchanged fair value of 62 sen, pegging the stock to FY20 price-to-book value (P/BV) of 0.8x, supported by a return on equity (ROE) of 9.3%.
The group announced that its wholly-owned subsidiary, Tune Direct Ltd, has entered into an sale and purchase (S&P) agreement with LocalGlobe X, L.P. and Creandum V, L.P. to dispose of its entire 9.99% stake in Laka Ltd, which is based in the United Kingdom.
The research house is leaving its net profit estimates unchanged as the disposal of the group’s investment in Laka is not expected to impact the group’s core earnings.
The rationale for the disposal is to enable it to utilise the sales proceeds to strengthen its own digital and technological capabilities.
The shareholding will be sold for £555,369.36 or RM3 mil, based on an exchange rate of £1: RM5.40. The selling price was derived on a willing-buyer-willing-seller basis.
Recall in June 2018, the group announced its acquisition of a 9.99% stake in Laka, an insurtech start-up which operates on a crowd insurance model to rival traditional premiums. Laka offers non-conventional peer-to-peer protection to members of a community. The intention of TPG investing was to leverage the technological expertise of Laka to support its aspirations to become a leading digital insurer.
AmInvest analyst Kelvin Ong says: “The total cost for the investment back in 2018 was £499,478.07 or RM2.67 mil and it was funded internally.”
“With a selling price of circa RM3 mil, an estimated one-off gain of RM0.3 mil is expected to be recognised in the group’s upcoming 1Q20 results which are trivial in our opinion. The transaction is expected to be completed by March 31,” Ong says.
TPG’s share price was 56 sen before Jan 10 mid-day break.