Broker Network Share Discussion Threads

[geovest] 22/6/2007 15:42

Thanks for the heads up on Cobra.

The valuation seemes high looking at the basic numbers compared to BNH. Also of concern, when they formed Cobra in 2005 they set a target of 125 network members anf £500m premium income by end og 2006 and failed on both counts.

I would like to see their financials first before I decide to invest. In the meantime, keep buying BNH!

[recruiter] 22/6/2007 15:08

I know Cobra very well as I deal with them. I have known many of the board - especially Steve Burrows for a number of years & I regards him personally & professionally extremely high.
I know their operation inside out.
I will be buying shares when they float.
I am suprised at the mkt cap thouhg, I didnt know it would be valued this high.

[sbbowie] 22/6/2007 14:57

Shares magazine covered the impending Cobra AIM float this week, given the similarities in the business model with BNH it will be interesting to see how they progress. The fact that BNH are investing more to build up the network side could be seen as a defensive move, however with potential 3,500 targets there should more than enough scope for both of them.

'Uk-based retail and wholesale insurance broking group Cobra Holdings is about to join AIM, raising £10 million from institutions. The company, which will start trading in the last week of June, brings to the market a network of about 100 insurance brokers and is on track to expand that network, which currently boasts a combined premium account in excess of £350 million. Cobra will operate in five distinct areas of the insurance market, offering retail insurance, wholesale Lloyds facilities, underwriting capacity and financial services.

Chief executive Steve Burrows says 'The major issue in the insurance sector is consolidation, with 3500 brokers around the country, and we aim to be a consolidator.' Indeed, the group hopes to keep a fast acquisition pace, buying eight businesses a year. It reckons that there aren't many other companies with a similar business model, which delivers a dedicated policy range to the members of its network of brokers. Thanks to the scale of its business, Cobra can reduce the administration and servicing costs. The objective of the underwriting arm is to underwrite premiums of around £8 million in 2007, which could rise to £18 million during 2008. The float will leave Cobra with a market capitalision of £45 million.' They rate them a buy.

[diogenesj] 20/6/2007 09:32

Much better than I expected too, and explains the recent outperformance. Still looks pretty cheap if the brokers' figures are correct, let alone Geovest's...

[geovest] 19/6/2007 10:15

0rb1t - Agree with you that JLF and CBG face declining underlying income as a result of softening rates and are dependent on acquisitions to grow earnings.

BNH continues to grow network numbers, which is higly profitable and operationally geared. This drives profit higher, even in softer markets. Acquisitions are just the cherry on top and could even add to the network numbers, ie 2 cherries ;=).

I would expect EPS growth for 08 to be around 25-30%, i.e 37-39p, which means a FW PE of 10 on current price which still leaves substantial upside potential.

[0rb1t] 19/6/2007 10:02

BNH got their estimates improved better than I expected (nearly 20%) after their trading update. This should mean that they made 17p EPS in 2007 H2. So Y2008 estimate of 33.9p EPS (ie 17 x 2) seems to be assuming no growth and puts them on a future PE of 10.78 for the current year (and a dividend too!).

Other insurance consolidators, such as Jelf and CBG, are trading on higher multiples of up to 15. These companies are more vunerable to softening insurance rates than BNH as they are pure insurance plays.

[geovest] 19/6/2007 07:48

I noticed that the Brokers have increased their forecast EPS for Apr 07 to 30.1p, (up from 24p) and 2008 to 33.9p. @377 this means Current year PE of 12.5 and 08 PE of 11. Still cheap as chips with lots of upside potential as the 08 estimates only asumes growth of 12.5%, which is way too low considering the underlying growth of network members expected. I keep buying.

[dan_dare] 18/6/2007 23:37

I am looking for consolidation around 400. Time will tell.

[diogenesj] 15/6/2007 15:07

There's a small retip in the IC as well: 'trading on 14 times forecast full year earnings (pre-update), and remain a buy {at 341p]'.

[protean] 15/6/2007 12:00

shares mag has an update on BNH this week and says "Upbeat outlook should carry the shares higher". certainly looking that way today

[huwrayhenry] 15/6/2007 10:35

next stop 420p

[km1966] 15/6/2007 08:30

getting closer to 360 today

[eire voyager] 14/6/2007 13:25

Breakout 360 next stop

[ramu231] 12/6/2007 12:41

Geovest,

I've been in since 2004 and fully agree with you about poor PR and lack of clarity. If the current management team uses a decent PR outfit, then the share price will be much higher.

[protean] 12/6/2007 11:30

Huge volume going through today. Bodes well for a break out.

[njp] 12/6/2007 10:32

Well done, Geovest. Agree re management, and I think the chart amply shows how well they're doing. It's a classic. Low number of shares in issue magnifies the effect. In that latter respect, much like EDA, which is also doing well for me.

[geovest] 12/6/2007 10:24

Hi NJP, I've started buying from 95p and have not yet stopped. I have met the Management and checked their reputation and standing in the industry. This is a first class outfit and they have many years of profit growth still to come. They are not very good at PR and sometimes their announcements can sound unclear, but I'd rather have a management team concentrating on running the business profitably without the spin.

[njp] 12/6/2007 10:05

Happy holding - from 108p. Agree message somewhat mixed, though take Geovest's line. And maybe the increased values being sought for brokerages indicates a growing appreciation of the value in the sector.

[geovest] 12/6/2007 09:58

The supply is so tight that the MM's have even dropped the 500NMS limit.

[stegrego] 12/6/2007 09:39

Well i very nearly sold yesterday (from a 225 base though) but held off for the moment.

Agree that the statement was a tad worrying or at least slightly confusing

[spangle93] 12/6/2007 09:37

I have to admit that I took some very nice profits yesterday and sold (bought at 165p). The RNS just had more caveats and hints that I was comfortable with, and I've watched other shares where I had built up profits dwindle back down before I sold.

Of course, since I sold the price has now risen sweetly, so my usual skill and judgement is once again evident. :-(

Anyway, just wanted to wish all long term holders the very best, and I'll continue to watch the situation in case an entry point appears

[hectorp] 12/6/2007 09:20

The market does seem to like the news... but there is very little buying.

[qs9] 11/6/2007 20:15

Some pretty chunky buys gone through in the afternoon....fingers Xd for some upgrades and decent press tomorrow..

[geovest] 11/6/2007 12:48

Hectorp, don't get confused by the two sides of the business. Sales force has been doubled on the network member side where the business is currently very boyant and thre are more opportunities than they could handle.

The more difficult side is the acquisition, ie outright purchase of brokers, where they are saying they face more competition and longer cycles.

[hectorp] 11/6/2007 12:26

On the other hand there are only 15M shares in issue and market cap only 60M.
- I'm coming round to being quite neutral.