I have decided to buy more but the 266/276 spread is a problem. Need a 10p+
Rise just to break even. Must be very illiquid |
ST has just published his analysis of the results, and he is very positive. Sees the share price back over 300 before long.
I have one anxiety. I notice that the eponymous Mr Marsh is now 77 and has evidently built a vast array of contacts, has vast experience at spotting, evaluating and making deals happen. The MD is 31 and I am sure is a wise head on young shoulders but surely if and when the boss decides to hang up his boots, he will be sorely missed.
The BoD sould have, as with all other Boards, succession planning nailed down. But...
I would like to have my mind put at rest before another top up in this great, undervalued company |
Simon Thompson certainly didn't trigger my purchase here.
Having bought quite a few at the silly price of 208p I now find myself pondering my next move.
The write down on LEBC is substantial (33%) and certainly more than the loss of business mentioned (20%)yet total company NAV still rose by 3%.
50% of business outside the uk.
Once the dust settles there is certainly potential for an upgrade on the LEBC figure but it looks like they don't want to risk having to do a further downgrade.
At the current NAV of 361p a share price of 290p would still be at c. 20% discount.
I think I'll hold for now.
If they maintain their record of more than 11% asset value growth/year then the year end NAV would be 388p |
Good to see director purchases - although fairly small! |
Wonder if Simon Thompson will update? He might do to confirm his recent thoughts, which triggered the bounce-back. |
Generally positive results today. Recovery underway? |
This from their trading update 2nd Sept.
"Since XPT commenced trading, it has grown from start-up to $165m in Gross Written Premium and is approaching $3.9m of adjusted EBITDA in the current financial year ending 31 December 2019.
XPT continues to have an active pipeline of new investment opportunities and is in advanced discussions with a further significant value accretive acquisition opportunity."
Would be inclined to go for £3m or c. 7p/share.
It should be noted that this was only one of a number of likely/potential upgrades.
It looks like the total portfolio asset upgrades will be greater than any downgrade from LEBC. |
nm1234, yes it does depend on the $18m drawdown and I would agree with the £2-3m addition to the value of BPM's holding |
EV of $54m will include debt ,so should include the $18m drawn at completion. Best guess this may add £2-3m (say 5-7pps) to BPM's previous valuation. |
Doesn't today's announcement boost BPM's carrying value of XPT significantly?
I would have thought that longer term holders would have run the calculator over this but I make it a fairly substantial increase.
Could be way out here but would like to know one way or another.
My figures are :- EV now $54m and they now have a 32% share.
The value as 31st Jan this year was c. £7.7m to PBM
As I said,I could have the wrong end of everything here.
Edit: Given the recent turbulence in the share price I would have expected the company to make more of this IF my figures were correct so I have doubts. |
 Exploit BP Marsh and Partners anomalous discount to NAV
Simon Thompson
Investors Chronicle
September 9, 2019
Financial markets should operate efficiently, embedding all known information into asset prices. However, if they did so then the share price of insurance sector investment company BP Marsh & Partners (BPM:216p), a company that has delivered 11.9 per cent average annual compound growth in net asset value (NAV) since 1990 by backing the management of its investee companies, would not have fallen by a fifth last week.
The share price reversal was prompted by news that LEBC, a financial advisory group in which BP Marsh holds a 59 per cent stake, agreed voluntarily to cease providing defined-benefit (DB) transfer advice following a market-wide review by the Financial Conduct Authority (FCA). The DB segment of the business accounted for a fifth of LEBC’s annual revenue. The stake in LEBC has a carrying value of £35.5m (98.6p a share) in BP Marsh’s accounts, implying an enterprise value of 13 times LEBC’s operating profit after adjusting for net cash on its balance sheet.
The stake also accounts for over a quarter of BP Marsh’s last reported net asset value (NAV) of £126.2m (350p a share). LEBC has performed well to date, but clearly there will be an impairment charge on the holding when BP Marsh reports its interim results on Tuesday 15 October. But what investors have ignored is that BP Marsh’s board have said that “the strong performance delivered by a number of our investee companies in recent months means that the company will emerge in a satisfactory position as regards its financial results.” In other words, expect valuation uplifts on the rest of the portfolio to largely offset the write-down on the LEBC investment. In fact, the directors brought forward a pre-close trading update to highlight just how well some of the investee companies have been performing.
For instance, BP Marsh holds a 44.3 per cent stake in CBC, a retail and wholesale Lloyd's insurance broker, that has a carrying value of £4.9m, implying an equity value of £11m for CBC as a whole, or 11 times last year’s annual operating profit. But the directors has revealed that CBC’s cash profit is on target to increase by 40 per cent in 2019, the same rate of growth as in 2018. It’s not the only high-growth company that BP Marsh is invested in either.
For instance, BP Marsh has a 20 per cent stake worth £6m in EC3 Brokers, an independent specialist Lloyd's broker and reinsurance broker. The business was founded by its current chief executive, Danny Driscoll, who led a management buyout to acquire EC3's book of business from AJ Gallagher in 2014. BP Marsh invested £5m in EC3 in December 2017, since when it has grown revenue from £9m to a forecast of almost £14m this year, while maintaining a good underlying profit margin.
I also note that BP Marsh’s 40.5 per cent stake in Walsingham Motor Insurance, a niche UK fleet motor Managing General Agency, looks set for valuation uplift, too. The holding is in the books for £1.37m, implying an equity value of £3.3m. However, Walsingham has already generated £21.5m of premium income in the first 10 months of the 2019 financial year (£19.8m for the whole of 2018) and is expected to “report cash profits significantly ahead of the 2018 result (£0.6m)”.
I could go on highlighting other portfolio companies that are set for a valuation upgrade, but I think I have made my point. Namely, the steep fall in BP Marsh’s share price since its annual results (‘BP Marsh posts record net asset value’, 11 June 2019) means that the shares are now trading on a 38 per cent discount to the company’s last reported NAV even though the board is guiding shareholders to expect a satisfactory first-half NAV performance. Markets are not working efficiently here.
Shares in BP Marsh have produced a 175 per cent total return including the recently paid final dividend of 4.76p a share for the 2018-19 financial year since I first advised buying at 88p ('Hyper value small-cap buy', 22 Jan 2012), a performance driven by the strong investment performance of its holdings. I expect that outperformance to continue, making the deep share price discount to NAV not only anomalous, but well worth exploiting. Buy. |
There has been a spectacular rebound in the share price this week.
ST has been very supportive in his comments,in the IC.
Are we sure that there are no lurking litigation claims on LEBC?
This would be positive to hear from LEBC or BPM. No mention from either.
Still feel the full story has not ended.
R. |
Yes good points Pavey
long term investment for me - Even if LEBC was marked to zero this would continue to be a long term investment for me (first purchase was in 2012)
I bought some more last week at 220p offered (the spread was quite wide at the time) |
Simon Thomson is doing nothing more than any investor should have done on their own.
Skyship, I'm not quite sure what your angle/motive is here but with the projected and well documented gains in the remainder of the portfolio I get a NAV of c.280p/share if I give absolutely no value to the LEBC holding.
My only caveat here is that if I assume that the agreement with the FCA to withdraw from all DB advice effectively draws a line under the matter then it is ridiculous for me to write off a £35m holding as the remaining 80% of the business appears to be doing well.
£35m is worth £1/share |
"Thar she blows"......as expected, Simon Thomson has returned to support his tip for BPM.
As I stated earlier, this provides a great opportunity to sell into the new buyers...now at c228p bid, you may even get 230p. |
Back in.
Simon T. In IC buy.
R. |
It would seem that the market is reducing the value of LEBC to ZERO and ignoring the management's forecasts of substantial year on year gains across the remaining portfolio holdings.
Bought in here last week after the fall.
Did hold these four years ago and sold for a quick profit but they have come back onto the radar with this news. |
Odd insignicant salwe but at a time when he is likely to have known about the FCA concerns. |
They lready have a financial history and profitable so not the case of valuing companies based on what intangibles are worth at the start of a concept/idea. |
Could this be another WPCT in the making? Unlisteds (imo and based on recent history) are virtually impossilbe to value unless normally a 2 to 3 year profitable trading history - otherwise often just hot air guesswork as a multiple of revenue followed very often by deflation as Woody's investors have found out to their cost - Not saying that this is the case here but possibly a flag sugesting maybe DYOR in detal/ |
Not much chance now of a flotation for LEBC - best one can hope for would be a trade sale once the smoke clears. |
It is what it is - price reflects the opinion of current market participants |
Have to agree but this market is so fragile any hint of a problem and the share price gets caned especially in a thinly traded. |
massive over reaction today |
Trading update brought forward |
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