# Chesnara: Great cash flow in tough markets

- Link: https://www.directorstalkinterviews.com/chesnara-great-cash-flow-in-tough-markets/4121114375
- Published: 2023-04-13T07:42:02+01:00
- Author: Amilia Stone

**Chesnara plc **(LON:CSN) has announced its 2022 results. With weak equity markets
and rising interest rates and credit spreads, the risk asset exposure weighed on
results. Economic Value profit came in at a loss of £106.1m, compared with a profit
of £57.8m in 2021. The balance sheet Economic Value also reduced from 416p to 340p
at 31 December 2022 (although there’s a gain from Conservatrix to be added in January).
Group cash generation, the movement in its surplus, was excellent. Base generation
for the group was £82.7m, compared with £20.3m in 2021 As expected, the dividend
was increased by 3% to give a total of 23.28p per share.

 * **Acquisitions:** There was little incremental news on acquisitions, other than
   updates on completion. The gains on acquisition are slightly higher than expected,
   but base steady state cash generation is in line with expectations. With integration
   almost complete, they are ready for further M&A.
 * **Estimates:** While 2022 was behind our estimates, we expect the acquisitions
   to contribute more going forward, leading to slight upgrades to our 2023 estimates.
   The net effect is to increase our 2023E EPS from 29.1p to 29.7p. We have introduced
   a 2024E EPS of 31.0p.
 * **Valuation:** With a price at approximately 85% of its forecast Economic Value,
   Chesnara seems undervalued. A prospective dividend yield of 7.9%, with good prospects
   of continued growth, also suggests an undervalued stock.
 * **Risks:** Ultimately, the company remains tied to movements in financial markets
   and adverse developments in operational areas. Having just come through a testing
   period for the latter, in particular, we can see how well the Company can manage
   these challenges.
 * **Investment summary:** Chesnara has three pillars for delivering value, under
   a responsible risk-based management. A close analysis reveals that there is substance
   underlying these aims. In our opinion, the discount to Economic Value looks wider
   than it should, and the yield appears high for a dividend that is both secure
   and growing.

[230411-Chesnara-plc-CSN-Great-cash-flow-in-tough-markets](https://www.directorstalkinterviews.com/wp-content/uploads/2023/04/230411-Chesnara-plc-CSN-Great-cash-flow-in-tough-markets.pdf)
[Download](https://www.directorstalkinterviews.com/wp-content/uploads/2023/04/230411-Chesnara-plc-CSN-Great-cash-flow-in-tough-markets.pdf)

Share on: