Chesnara Plc: Another fine acquisition

Hardman & Co
[shareaholic app="share_buttons" id_name="post_below_content"]

Chesnara plc (LON:CSN) has announced its seventh acquisition in the Netherlands, buying the closed life insurance books of “Conservatrix”. The latter is a life insurance and mortgage provider that filed for bankruptcy at the end of 2020 as a consequence of strategic errors by its US owner. The new policies will be bought by Chesnara’s Waard subsidiary, increasing its policy count by ca.70% and assets under administration by ca.90%. While less significant on these measures for the group as a whole, the acquisition does add meaningfully to its expected cashflow; it is expected to add £4m p.a. to the group.

  • Capital: The book is being bought for a nominal sum, with Chesnara adding £35m of capital. Of this, £14m will come from Waard’s existing resources and £21m from the group. The acquisition is expected to increase group Economic Value by £18m, 3% of the 2021 year-end total.
  • Estimates: The transaction has increased our normalised 2022E EPS by 35%, to 41.9p, while our 2023E EPS rises by 4%, to 27.3p. The first half saw weak equity markets and rising bond yields. While we have not adjusted our estimates, the interim results are likely to bring a fall in Economic Value.
  • 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, 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.

DOWNLOAD THE FULL REPORT

Share on:
Twitter
LinkedIn
Facebook
Email
Reddit
Telegram
WhatsApp
Pocket
Find more news, interviews, share price & company profile here for:

    Chesnara plc 20 Years of Dividend Growth Backed by £1.5 Billion Acquisition Surge (Video)

    Dr Brian Moretta explains how disciplined deal-making, strong cash generation, and operational progress across the UK and Europe are reinforcing Chesnara’s position

    Chesnara Plc Showing good operational progress

    Chesnara Plc's 2024 results showcase strong growth and profitability, highlighting a 17% increase in Economic Value profit and consistent dividend growth.

    Chesnara Plc: Happy new acquisition

    Chesnara Plc boosts its portfolio with a strategic acquisition from Canada Life UK, enhancing value and potential dividend growth amid a promising outlook.

    Chesnara 2024 Interim Results and Insights for Investors (LON:CNA)

    Chesnara plc's 2024 interim results highlight stable financial performance amidst market challenges, with a 3% dividend increase marking 20 years of growth.

    Chesnara plc 2024 interim results a steady performance (VIDEO)

    Discover key insights into Chesnara Plc's 2024 interim results, covering performance, economic factors, acquisitions, and shareholder returns.

    Chesnara 1H’24: Equity Gains, Dividend Growth, and Estimate Downgrades

    Chesnara Plc (LON:CSN) reports 1H’24 results: positive equity returns tempered by adverse lapse experience. Economic Value profit at £20.2m, down from 1H’23.

      Search

      Search