Hot Features
Premium
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
I recommended shares in AIM-listed specialist non-life insurance investor, service provider and underwriting manager, Randall & Quilter Investment Holdings (LSE:RQIH) at 127.5p in July 2011 on t1ps, the website I founded and edited for more than 12 years, delivering an average gain per tip of 42.7%, before departing last September to set up the Nifty Fifty offering. These shares have yet to really perform – but having commenced 2013 at 106p, they currently trade at 119.5p following a trading update today. The following reviews this and offers my updated view…
Today’s brief update stated, ahead of a results announcement on 25th April, that the company expects its “pre-tax result for the year ending 31 December 2012, to be in line with current market expectations. The board remains confident in the positive outlook for the group during 2013”.
The company’s joint broker, Shore Capital, has a pre-tax profit of £10.25 million, earnings per share of 15.2p, a distribution of 8.5p per share and net tangible asset value of 105p per share pencilled in for 2012. The broker additionally highlighted that, whilst its 2013 profit expectation is now slightly lower than previously, it sees a “considerably improved quality of earnings, with a growing proportion of earnings emanating from the services units offsetting the reduced investment income and the more lumpy reserve releases”. For 2013 the forecast is thus for a pre-tax profit of £10.55 million (from £11.2 million), earnings per share of 15.6p (unchanged due to a lower assumed tax charge), a distribution of 9p per share and a net tangible asset value in excess of 110p. As such, the shares currently trade on an earnings multiple of less than 8 for last year, falling to 7.7x this, yield 7.5% and trade at not much of a premium to net tangible asset value.
The outlook appears to be pretty similar to as it was on the company’s September interim results release when it noted that although regulatory changes and low yields on fixed income investments continued to affect it, it was managing these effectively and the newer Underwriting Management and Captives divisions “offer significant growth potential”, with the deal pipeline being “very active” – the company has subsequently updated, following a £0.525 million captive insurer acquisition earlier this month, that that deal “further evidences the increasing level of acquisition activity we are seeing as a group”.
This was never a share likely to race ahead – I recommended it as a solid growth and income play and continue to consider it such. Going forward, I expect modest capital appreciation which in conjunction with the significant yield should see shareholders achieve decent returns. Shore Capital has a sum-of-the-parts valuation of 135p per share, based on applying what look far from aggressive parameters of a 20% discount to the net assets of the run-off book and a 9x multiple to the non run-off earnings. Om that basis it is a hold at worst and on balance, for the yield, I’d be a buyer.
Tom Winnifrith writes for 10 UK and US websites – links to all of his work on those sites but also stacks of unique content can be found on his own blog www.TomWinnifrith.com
You can get alerts on all of Tom’s articles and thoughts by following him on twitter @tomwinnifrith
