Chesnara Share Discussion Threads

[speedsgh] 18/4/2023 06:42

All fairly superficial but a bit of additional exposure all the same...



Hardman: High-yielding Chesnara looks undervalued

Recent annual results from Chesnara (CSN), the life insurance and pension consolidator, came in slightly below expectations but Hardman & Co remains positive on the cash-generative business it believes is undervalued.

Having completed three acquisitions, including Sanlam Life & Pension, the group increased cash by £82.7m last year, compared with £20.3m in 2021.

Pro forma group economic value fell to 354p per share from 416p the previous year, reflecting stock market declines, but the dividend as expected grew 3% to 23.3p per share.

Although volatile, the shares at 291p have traded sideways in the past year.

‘With a price at approximately 85% of its forecast economic value, Chesnara seems undervalued. A prospective dividend yield of 7.9%, with good prospects of continued growth, also suggests an undervalued stock,’ said Hardman’s analysts.

[makinbuks] 12/4/2023 15:12

Two comments from Hardman I particularly like:

"Chesnara is ready for further M&A" - yes and to be honest I'm surprised we haven't seen more from the new management

"the yield appears high for a dividend that is both secure and growing" - it was always thus and this remains the most attractive aspect of the stock, but don't expect the rating to change. If central banks cut rates through 2024 we may see a minor benefit

[speedsgh] 11/4/2023 19:15

New Hardman & Co 'paid for' research note...

Great cash flow in tough markets -

[retsius] 06/4/2023 08:40

Div. tax free outwith an ISA for 23/24 =£1000 after that tax at almost 34% for a 40% taxpayer.

Crazy.

[thamestrader] 06/4/2023 08:15

Don't panic! ex-div today.

[edmundshaw] 05/4/2023 15:24

He interviews well. All sounds great and very reassuring... Looks like we got lucky raising cash for acquisitions on good terms just before interest rates shot up!

[lord gnome] 04/4/2023 17:03

Thanks Mirandaj. All sounds very positive. Just what I've come to expect from Chesnara.

[mirandaj] 04/4/2023 14:10

Steve Murray gives his take on the highlights from the year, highlighting it being the 18th consecutive year of dividend growth, before casting his eye forward to the rest of 2023:

3rd April 2023

[lord gnome] 31/3/2023 14:20

Thanks speedsgh. We actually got above 300 for a short while.

[makinbuks] 31/3/2023 13:33

Yes thanks for that. I wonder of the recent market volatility makes it more or less likely that they will find acquisitions at attractive prices?

[scottishfield] 31/3/2023 12:55

Tks speedsgh

[speedsgh] 31/3/2023 12:54

Six months of chaotic bond markets has slapped a cheaper price tag on insurers. In the wake of the latest upheaval caused by recent banking failures, shares in Chesnara trade at a 19 per cent discount to the group’s economic value, a measure of net assets and future cashflow set to be generated by the business.

Yet annual trading figures underline why the closed-book consolidator can withstand a short-term fall in investment returns and crucially, maintain generous dividends. Another 3 per cent rise in the dividend to 23.28p a share extends its record of consecutive dividend increases to 18 years. At the present price, the shares offer a dividend yield of 8.1 per cent.

How sustainable is that? Without completing more acquisitions, the existing business is expected to throw off about £300 million in cash over the next five years. That would easily cover the £239 million cost of increasing the dividend by roughly 3 per cent each year plus servicing its debt. Last year alone, cash generated by the group’s British, Dutch and Swedish businesses was £61.9 million, almost twice the £34 million cost of the annual dividend.

On one hand, falling equity markets last year meant lower fees earned on policy investments by Chesnara — not good over an extended period. On the other, a sharp decline in stock markets also reduces the level of capital that Chesnara has to hold, as the risk of a further heavy decline diminishes, pushing up cash generation in the short term. That is one reason that, from a regulatory capital position, Chesnara is in solid form. The Solvency II ratio is 182 per cent even after acquisitions, a way above the target range of 140 per cent to 160 per cent.

For a closed-book insurance company such as Chesnara, dealmaking is crucial to replace the cash generated by pools of policies as they mature. Three acquisitions have been completed since the start of last year, which should generate annual cash of £10 million. There is about £100 million left for more bolt-on deals, after maintaining between £40 million and £50 million on the balance sheet. It is enough to keep investors secure in dividend prospects.

ADVICE Buy
WHY A generous dividend at a discounted price

[thebutler] 31/3/2023 12:47

I've got complete faith in the financials and taking the opportunity to load up on CSN, PHNX, AV, MNG, LGEN and ABDN whilst they're still "apparently" very cheap.

[jeff h] 31/3/2023 12:44

Tipped as a buy by Tempus in The Times today.

[deadly] 31/3/2023 12:27

Same might happen to PHNX one day, but unloved at present

[lord gnome] 31/3/2023 12:14

Somebody’s had a closer look at the results. Stock in demand today. I might yet see my 300 again.

[al101uk] 30/3/2023 09:13

I was a little worried about the acquisition strategy affecting the dividend, but the number of times they speak about the "18 years of continued dividend growth" in the report, it seems I have nothing to worry about. Looks like dividends remain a priority.

Results had exactly the effect on the market as I would have expected, pretty much none.

Happy our new leader isn't rushing in to things, Chesnanra seems to still be plodding along as it always has.

[jonnybig] 30/3/2023 08:32

Well under the radar, a solid great value share which is a nice inclusion in one's portfolio.

[lord gnome] 30/3/2023 08:16

A solid income stock. Another dividend increase. What’s not to like in these numbers? This is one of those companies that never cause you to lose sleep. One day we might even see the share price back over £3.00.

[septimus quaid] 30/3/2023 07:08

For the dividend chasers amongst us:

The recommended final dividend of 15.16p per share is expected to be paid on 26 May 2023. The ordinary shares will be quoted ex-dividend on the London Stock Exchange as of 6 April 2023. The record date for eligibility for payment will be 11 April 2023.

[wizzkid211] 30/3/2023 07:05

CASH GENERATION AND DIVIDS - 18 YEARS OF DIVID GROWTH
The results during the year, combined with the group's balance sheet strength, support a further year of dividend growth. The Board has proposed a 2022 final dividend of 15.16p per share (2022 total dividend of 23.28p), which is a 3% increase compared to 2021 and extends the period of uninterrupted dividend growth to 18 years.

[mirandaj] 01/3/2023 07:23

Results 30th March
From RNS Notes to editors:

Consistent delivery of the Company strategy has enabled Chesnara to increase its dividend for 18 years in succession. Further details are available on the Company's website ( www.chesnara.co.uk ).