Published November 20, 2008

Tune Money upbeat on next year's results

Tony Fernandes says finance house will wipe out RM9.6m accumulated losses

By S JAYASANKARAN
IN KUALA LUMPUR

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TONY Fernandes, a major shareholder of budget finance house Tune Money, said yesterday that the company would wipe out its accumulated RM9.6 million (S$4.1 million) in losses by next year and that its shareholders would invest more money into the firm to enter markets such as Indonesia and Thailand.

Mr Fernandes confirmed that the firm's chief executive officer and 5 per cent shareholder Tengku Zafrul Tengku Aziz was resigning but denied that it was due to any misunderstanding between shareholders. He told reporters at a press conference that Tengku Zafrul's departure was always on the cards as he had already done the preliminary groundwork in a very regulated industry and the business now needed a more 'marketing-oriented' chief executive.

Mr Fernandes also said that the firm was not downsizing but was merely delaying the implementation of some of its new products such as unit trusts because 'now is not the time to launch a unit trust'.

Tune Money is a spinoff from the wildly successful AirAsia, Asia's largest budget airline. Inspired by its success, Mr Fernandes, AirAsia's founder, moved to create a host of other budget services including Tune Money and Tune Hotels, a chain of low-cost hotels that are extremely popular in Malaysia and which Mr Fernandes described yesterday as 'profitable from the word go'.

Its business model is simple. Mr Fernandes thought that the reason why financial services such as insurance, for example, were expensive was the fact that they involved middlemen who took a commission off the top and so racked up costs.

He thought the way out of that was the Internet, so Tune Money began by selling insurance policies online that offered cheaper premiums simply because they cut out the middleman.

The insurance coverage and debit cards offered by Tune Money came through CIMB, Malaysia's largest investment bank, which also holds a 25 per cent interest in Tune Money, which was capitalised at RM26.6 million back in 2006.

Tune's other shareholders are Lim Kean Onn (8 per cent), Kallimullah Hassan (8 per cent) and Mr Fernandes and his allies (49 per cent). Mr Lim and Mr Kallimullah are partners in ECM-Libra, one of Malaysia's smaller investment banks. Incidentally, Tengku Zafrul used to head Avenue Assets, a stockbrokerage that was bought over by ECM-Libra almost three years ago.

Mr Fernandes said that all cash calls - almost RM4 million to date - had been subscribed fully by the firm's shareholders but the latest cash call (RM5 million) has not been done 'because it has been postponed'.

Despite the injections, the firm has been bleeding. According to documents lodged with the Companies Commission, Tune Money made a net loss of RM8.6 million for the year ended December 2007 following a loss of slightly over RM1 million for the previous year.

Even so, Mr Fernandes painted a rosy future for the company, pointing out that the firm already has 25,000 customers for its debit cards. 'We intend to push this vigorously because it has synergies with our business in AirAsia where many of our customers do not have credit cards at all.'

Indeed, the Tune Money director said that the company could make as much as RM14 million in profit next year and 'we think we will make some really good money in 2010'.