Chesnara Share Discussion Threads

[banj] 05/4/2010 19:35

Thanks JW.

Maybe there is yet more upside from the Moderna acquisition or do you believe it's all in the price?

So far Management has appeared to have played a blinder wrt Moderna & have now adopted a growth strategy for the Company, with the clear support of Investors.

That said the RSL valuation vis-a-vis CSN look compelling!

[jonwig] 05/4/2010 11:54

A brief look at Resolution [RSL] provokes some thoughts.

RSL MCap is £2005m, share price is 83.1p and and EV was 144.6p on 31 Dec 09. That looks a bit of an anomaly set against CSN (MCap 251m, share price 234p, EV 259p).

However, RSL calculates a Market-Consistent EV [MCEV] whilst CSN adopts the European EV [EEV] standard.
MCEV is more recent, and likely to become the industry standard, as EEV gives too much discretion to individual companies. Whilst the end-results tend to be similar, the calculations are done in the opposite directions.
From what I can see, MCEV should be lower than EEV as more risk factors are taken into account. That means the anomaly would be even stronger.

Friends Provident was acquired for 65.5% of MCEV, putting CSN's valuation into perspective.

Why is RSL rated at such a significant discount to EV?
There's a transition period while Friends Provident is digested, and reports of a possible rights issue to fund future acquisitions. RSL says it will pay 4.08p from 2010 and dividend policy will be reviewed at each acquisition. The wording is unclear as to whether 4.08p is a base figure or a constant.

Is CSN on RSL's shopping list? I doubt it: RSL is unlikely to pay the current valuation of CSN against its EEV.
So why is CSN on such a fat valuation? The dividend? Well, a large part of that is return of capital - I hope holders realise that!

The AGM is in London on 13 May. If I can get down there I shall - the question of adoption of MCEV is worth pursuing.

Meanwhile a switch of part of my CSN holding into RSL is under review.

[johnroger] 01/4/2010 15:28

Times on line

Chesnara

Count Chesnara among the winners from the Icelandic financial crisis.

The owner of Countrywide Assured has done several deals since being spun off from its estate agency parent in 2004, but the purchase last year of Moderna, of Sweden, looks to have been its best. The Stockholm pensions and savings group was being sold in a hurry by Glitnir, the troubled Icelandic bank, which explains why Chesnara picked it up for only £20 million, or a 73 per cent discount to the usual life insurance yardstick of a company's worth.

Yesterday's full-year figures showed that Moderna contributed £25.1 million to last year's operating profits, which nearly doubled to £44.7 million. There were other boosts to the bottom line. A recovery in stock markets has increased the value of Chesnara's investment portfolios, and the fees it takes from running them. The rate at which customers cancel policies has also been less than expected, which is significant for its UK operations, which are essentially in run-off.

The question from here is whether Chesnara can generate cash in Sweden, which requires further investment, and find new books of business to buy. It has only £4 million of net debt, and the 2012 introduction of new solvency regulations should prompt larger companies to offload older life policies they are no longer willing to fund. Competition for such assets in Chesnara's niche is relatively slight, with the likes of Resolution and Pearl interested only in much bigger deals.

Shareholders are unlikely to see a repeat of recent strong capital gains: the shares are up by 77 per cent on the year. But as a payer of high and rising dividends - at 234¾p, Chesnara still provides a yield of 6.8 per cent - its attraction is undiminished. Hold.

[chairman2] 31/3/2010 22:39

jonwig

now plowed through the long results report
and still think my question is fundamental
company has to prove retained profits will
grow shareholder value faster than divis.

but thanks for pointing it out

I guess I am less trusting than most
some may be satisfied being tossed a
bone in the shape of a small rise in divi
- I just want two bones!

[jonwig] 31/3/2010 13:55

Chairman - read the comments re working capital requirements for Moderna.

[ted32] 31/3/2010 11:41

Chairman2...If CSN can increase the div in line with inflation and make sound aquisitions that in turn will lead to a higher share price.

[chairman2] 31/3/2010 11:31

and you would prefer that to divis?

[ted32] 31/3/2010 11:17

Chair..Perhaps they have an aquisition in mind

[chairman2] 31/3/2010 11:10

Why has the company not increased the dividend more?

retained profits (£11.5 m) now almost equal the size of the payout
(£14 m) and total £25m over last 3 years.

What is this for? The company could pay a special divi and
still have increase EV.

[hieronymous1] 31/3/2010 10:36

Thanks for that Dave. When something is always there you stop noticing it. At least I do and am consequently covered in confusion!

[jonwig] 31/3/2010 09:14

Haven't done more that scan quickly through, but everything looks to be in-line with expectations.

If it's been missed, xd is 14/04 and pay is 20/05.

[daveofdevon] 31/3/2010 08:12

And at the top of this page !

[hieronymous1] 31/3/2010 08:11

Final results available at:

[chairman2] 30/3/2010 22:51

thanks jonwig

just stirring the pot

[markie7] 30/3/2010 18:48

big day tomorrow

[jonwig] 30/3/2010 14:29

Chairman - well, the Pru is proposing 1.7 times EV to buy AIA! Mind, it's expecting strong growth over East, hardly the scenario for poor old closed funds.

Current holdings can be found from the last AR on the website plus RNS changes since ... not something I've particularly checked.

I'm tempted to think current strength is affected by some leakage in tomorrow's numbers. A change in EEV caused by a higher DCF rate is not important, but any suggestion that integration of Moderna is proving costly or something like that would be a strong negative.

Barring upside surprises, I'd expect the share price to fall tomorrow.

[luderitz] 30/3/2010 12:36

Many thank's al101uk, I vaguely remember that being the case.

[chairman2] 30/3/2010 11:18

ANyone got any upto date info on who the major shareholders are?

ANyone speculating on Resolution making an offer for this at EV?

[al101uk] 30/3/2010 11:13

Always done well on results as far as I can remember. Been a holder since £1.58

[luderitz] 30/3/2010 09:58

Has it been a case of sell on the news in the past with this one please?

Not a holder at the moment and can't remember what has happened before.

[markie7] 30/3/2010 08:26

results tmrw, will be fascinating. what a share this is.

[banj] 29/3/2010 16:46

Blimey, stella stock. Still holding :-) Special dividend coming?

[chairman2] 11/3/2010 23:44

yield curve may be steeping
but discount rates more likely to fall rather than rise

any such move would be signalled in advance inmho

[wilmdav] 11/3/2010 15:30

Thanks Jonwig.

As you say discount rate looks likely to be steady. I've just checked a couple of other companies reporting to 31/12/09. They used discount rates of 5.6% and 5.7% for their IAS19 pension calcs respectively.