B.p. Marsh & Partners Share Discussion Threads

[retsius] 07/9/2017 08:43

Very comprehensive statement update which I love about a company has been issued this morning.('love' when it is good!)

All very stable and reassuring.Bank balance of £13.2 m is a comfort.

I noted that exposure to insurance claims for hurricane damage does not affect the Group.
R.

[spob] 07/8/2017 08:01

BP Marsh’s hidden value




Simon Thompson

Investors Chronicle

31 July 2017


Shares in cash-rich insurance sector investment company BP Marsh & Partners (BPM:230p) are making good headway towards my upgraded target price of 250p ('On the money', 7 Jun 2017). It's a business I know incredibly well, having initiated coverage at 88p ('Hyper value small-cap buy', 22 Jan 2012).

The company’s investment team has wasted no time in setting about investing the £22m it raised by selling its stake in Besso Insurance, a top 20 independent Lloyd's broking group, a deal I commented on at the time ('Four undervalued growth plays', 24 Apr 2017). For instance, it has just acquired a further 17.84 per cent shareholding in LEBC, an independent financial advisory firm that has been making hay in the post Retail Distribution Review (RDR) environment. Boosted by investment in technology, success in targeting the ‘at-retirement market’ and following the introduction of the RDR at the end of 2012, LEBC’s revenues have surged by over a third to £15.4m in the three years to end September 2016 and its trading profits have almost trebled to £2.1m.

BP Marsh paid £7.138m for the 17.84 per cent stake to value LEBC’s entire equity at £40m, buying out retiring employee shareholders, members of management through share ownership plans, and a part sell-down by founder and chief executive, Jack McVitie. This takes BP Marsh’s holding in LEBC to 60.87 per cent, while the balance of the equity continues to be held by founder and chief executive, Jack McVitie and LEBC’s management.

It’s an interesting deal because when I covered BP Marsh’s full-year results a couple of months ago ('On the money', 7 Jun 2017), I noted that BP Marsh’s 43 per cent stake in LEBC “looks undervalued at £13m, even after being revalued upwards by 11 per cent since July 2016. The valuation implies a value for LEBC’s equity of only £30.2m, or 15 times trading profit.” To put that valuation into some perspective, the equity of Mattioli Woods (MTW:819p) is rated on 20 times cash profits for the year just ended. Mr Marsh also revealed during our results call that “every now and again we are passed an enquiry to buy LEBC” and the current valuation “is a long way below these approaches.”

The point being that the implied equity value of £40m for LEBC following BP Marsh’s latest investment equates to a 33 per cent upgrade on the carrying value of its previous 43 per cent investment, suggesting a £4.2m uplift, worth 14p a share, to the company’s last reported net asset value of £79.7m. In other words, pro-forma net asset value is now closer to 290p a share. Furthermore, there is scope for further upside given LEBC is still being valued on a lower rating than Mattioli Woods.

There are very real prospects for further valuation gains elsewhere in BP Marsh’s portfolio too, and in particular, on its 18.6 per cent holding in Nexus Underwriting, an independent speciality Managing General Agency. This investment was last valued in BP Marsh’s accounts at £13.9m, placing a value of £74m on Nexus’ equity, the equivalent of 15 times last year’s cash profits, falling to only 10 times previous guidance based on Nexus’ cash profits rising to £7.3m. However, earlier this year Hyperion Insurance sold its majority stake in CFC Underwriting to a consortium of private investors and the management team on a multiple of 22 times cash profits, suggesting a conservative valuation approach being adopted by BP March’s investment committee.

Moreover, Nexus has just announced the acquisition of Zon Re Accident Reinsurance, a U.S. based Reinsurance Underwriting Agency. In 2016, Zon Re produced a gross written premium of $14.3m, revenue of $3.77m and cash profits of $2.69m (£2m). This acquisition has been funded by tapping a previously announced £30m loan facility, and follows two other acquisitions: marine cargo specialist Vectura Underwriting, and trade credit specialist Equinox Global. Factoring in these three acquisitions and strong organic growth in the business, the latest upgraded financial guidance from Nexus’ board points towards this year’s gross written premium rising to £160m to generate commission income of £30m and cash profits in excess of £11m, suggesting cash profits will double year on year.

In other words, the carrying value of BP Marsh’s holding which values Nexus’ equity at only £74.7m is looking very conservative indeed, so expect valuation upgrades on here too. I would also flag up that BP Marsh still some way to go to invest the rest of the £29m cash pile on its balance sheet, and expect further news on the investment front in coming months.

In the circumstances, I am upgrading my target price from 250p to a range between 260p to 275p to reflect the likely portfolio valuation uplifts I have outlined above. Buy.

[spob] 01/8/2017 06:53

I will put up his comments at the weekend

would be a bit unfair to magazine subscribers to put them on now


BPM has served me very well indeed

[skyship] 31/7/2017 14:49

Indeed, another good puff by ST in his IC Online column....uprates target from 250p to a range of 260p-275p

[elmfield] 31/7/2017 13:40

Thx,
Reckon Simon T has been singing praises again.

[tom.muir] 31/7/2017 12:30

Yes I got my divvy on Friday !
First half year ends today so we may get an update soon.
Nice increase in share price today.

Tom

[elmfield] 31/7/2017 12:21

We are ex div, are we not?
Looks good.

[russman] 31/7/2017 11:34

Could have said it would be earning enhancing. Well expected returns must be greater than wacc. Slight premium for control.

[tom.muir] 28/7/2017 07:51

Russman; on a historic basis this may well look a bit toppy but BPM will have seen the forward projections and will have based his valuation on those. He is not renowned for throwing his cash away so I think we are safe in thinking that it's a fair price

[russman] 27/7/2017 11:50

Think the purchase price is a bit toppy.Seems to be bulking up.Could refinance and flip it.

[retsius] 27/7/2017 10:33

Very nice tick up on the news.

Market seems to like it.

I wonder if this was one of the `opportunities` alluded to about a month ago , as reported by ST, with Mr Marsh?

Div .tomorrow as the icing on the cake.
R.

[thirty fifty twenty] 27/7/2017 09:45

yes that is correct and gives a total value of c.£40m for LEBC.
their current holding is in the books pro rata on c.£30m.

yes it is a big investment,
and now that they own 60% that is also a out of strategic levels.
so this leads me to conclude...

1 - LEBC MUST be trading strongly
2 - they have a bigger picture (maybe float?) envisaged for LEBC
it is certainly a consolidating and expanding market so floats or bids reasonably likely.

All IMHO, DYOR + BoL
BPM is in my top5 hldgs

[russman] 27/7/2017 09:30

7.1m is that correct for 18% of LEBC.
That is quite a big punt by their past history.

[elmfield] 27/7/2017 09:03

Nice, good job.

[peter27] 25/7/2017 19:41

The latter point is governed by AIM rules.

[retsius] 25/7/2017 19:17

Peter27
Sorry, don't understand you explanation. I am pretty dense!

[peter27] 24/7/2017 21:27

It was discussed at the AGM. They want to gradually reduce the point at which the discount triggers buyback. They are also constrained by the number and size of bargains.

[retsius] 24/7/2017 21:13

I wonder why they put a Statement out today concerning 'Buy Backs'. I thought that was written in the accounts so why reiterate it today?
I suppose the answer is they may buy back shares sooner rather than later?
R.

[retsius] 28/6/2017 18:32

I hope u all topped today for the Divvy.
Suppose to be some other imminent news from Bpm, from what he told ST, haven't heard it yet.
R.

[bscuit] 19/6/2017 20:07

but probably on the RNS

[retsius] 19/6/2017 18:41

Rise today of 5p on volume of err....... none? (Advfn trades)

[2breakout] 13/6/2017 21:47

17931 buy at 223p reported after close may have helped.

[thirty fifty twenty] 13/6/2017 19:42

I don't think this explains the rise. Odd that they tell of other acquisitions but details to follow. Still intrigued that in telecom with ST BPM said 2 events happening within weeks. The US is only one and I assume that other will be a different type of corporate transaction.