# Chesnara: Market benefits overwhelm operational challenges

- Link: https://www.directorstalkinterviews.com/chesnara-market-benefits-overwhelm-operational-challenges/4121066014
- Published: 2022-05-24T08:40:57+01:00
- Author: Amilia Stone

**Chesnara plc **(LON:CSN) has announced its 2021 full-year results. The headline
figures are good, with Economic Value earnings of £57.8m. Within this, there were
strong positive results from economic variances. Operational variances showed the
effect of the challenges to the Swedish business, in particular, although their 
negative contribution of £32.6m was a distinct improvement on the £49.9m loss in
2020. The final dividend increased by 3% to give a total for the year of 22.60p.
On the balance sheet, the growth in Economic Value was offset by adverse movements
in exchange rates; net, it shrank by 2%.

 * **Acquisitions:** Since the results announcement, the acquisitions of Sanlam 
   and Robein Leven have completed. The announcement was preceded in February by
   the issue of a £200m note at 4.75%. The latter signals that management is confident
   about finding more transactions in the near future.
 * **Estimates:** The additional bond interest will be partially offset by savings
   from repaying existing facilities and reduced tax. We have assumed no additional
   earnings from acquisitions in 2022, while, in 2023, they will offset the bond
   costs. Net, we have reduced our 2022E EPS by 2%, and 2023E by 3%.
 * **Valuation:** With a price at approximately two thirds of its Economic Value,
   Chesnara seems undervalued. A prospective dividend yield of 8.1%, 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 Chesnara can manage
   these challenges.
 * **Investment summary:** Chesnara has three pillars for delivering value, but 
   also aims to be the “least troublesome source of sustainable, attractive dividend
   yield”. A close analysis reveals that there is substance underlying this aim.
   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.

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