R&q Insurance Share Discussion Threads

[bisiboy] 12/2/2011 13:26

i have been looking at these on and off for a year
havnt bought yet what is putting me off is cash flow
can anyone tell me if i am missing something but at an operating level it seams to be negative and has been for some time.
ST at the IC does often come up with some good tips and several of the other
companies in his 2011 bargain portfolio i own.
just not sure about R&Q

[red ninja] 11/2/2011 16:02

Bargain shares for 2011
Created:
11 February 2011
Written by:
Simon Thompson
Randall & Quilter (RQIH)
Aim: Insurance
Share price: 90.5p
Bid-offer spread: 90-91.5p
Market capitalisation: £50m
Website: www.rqih.com
Founded in 1992 by executive chairman and chief executive Ken Randall and finance director Alan Quilter, Randall & Quilter is a specialist in managing the run-off of insurance companies and Lloyd's of London syndicates that have stopped underwriting new contracts, but have already settled liabilities arising from policies written.
This is a huge market estimated to be worth nearly £30bn in the UK alone – accounting for 15 per cent of the non-life insurance market – and in excess of $500bn (£316bn) globally, according to research house Equity Development.
To date R&Q has managed the purchase of 17 companies, either for itself or for private equity firm Dukes Place, and currently has a portfolio of nine companies in run-off with net assets of £74m. This insurance investment business posted profits of £4.7m in the first half of last year, but the company also has an insurance services business, which generated £3.9m of profit in the first half. Its principal activities are claims management, accounting, regulatory returns and reinsurance management.
If you deduct central overheads and contributions from a couple of smaller divisions, R&Q reported pre-tax profits of £5.8m in the six-month period. On the same basis, analysts at Numis Securities are looking for pre-tax profits of around £7.3m for the year as a whole, rising to £7.8m in 2011. This should produce EPS of 9.2p and 9.8p, respectively, and fund a full-year dividend of 7.35p as well as offering scope to raise the payout to around 7.75p this year, as brokers predict. In other words, at 91p, the shares are currently offering a chunky forward 8.5 per cent yield – with the dividend covered 1.3 times by earnings – and are rated on a modest PE ratio of nine.
The investment case is even more compelling when you consider that £30m of the company's £80m net assets are in the price for nothing. On a bargain rating of 1.1, and with the high-yielding shares trading 37 per cent below book value of 146p, R&Q is significantly undervalued.

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[crawford] 11/2/2011 12:24

envirovision,
thanks for that.

[envirovision] 11/2/2011 11:46

I can buy £100,000 worth at 91.6p You are not looking at sells being printed at the moment.

[crawford] 11/2/2011 11:43

Quite a lot of sells coming in; ironically I've had this on my watchlist for the past week, the dividend having caught my eye while scanning The Times.

[labatie] 11/2/2011 11:21

Envirovision

Is it possible to post a link to the article please?

[envirovision] 11/2/2011 09:57

Tipped by Simon Thompson in Investors Chronicle as one of his Bargain Share of 2011 portfolio picks.

[labatie] 11/2/2011 08:35

This counts as panic buying in this one!

[envirovision] 11/2/2011 08:33

So i guess by the rash of buys first thing its been tipped ?

[topvest] 04/2/2011 20:51

Bought a few more of these this week. Cheap price at the moment. Good management team, so should be rewarding medium term.

[red ninja] 16/1/2011 16:37

Mmm sounds good, one day hopefully the share price will close that gap to NAV.

[envirovision] 15/1/2011 13:48

A detailed research report there. From the note:

The current share price of 91p puts them on a discount of 38% to NAV
(and over 10% to net tangible assets), a multiple of 9x current year
earnings, and only 6.7x forecast eps for 2011, and a yield of more than
8%.

Our estimate of a fair price currently and hence our
short/medium-term target for the shares is 146p, a 60% premium
to the current price, at which level the yield would still be 5%.

[rockafella2] 06/1/2011 22:23

New note -

[red ninja] 22/12/2010 16:21

TiredOldBroker,

A good explaination of the issues involved.

[envirovision] 22/12/2010 11:49

I understand your point. However had the company paid a dividend, I would have been astonished if something as illiquid as this would have fallen by the same amount or more than a declared dividend.

[tiredoldbroker] 22/12/2010 11:15

envirovision, I can see that the return of capital has got you quite steamed up but I wonder if you're seeing things the right way ?

Companies can pay a dividend (income), or make a capital repayment which may involve altering the number of shares in issue. But even for a dividend, the response of the stock market is normally to mark the share price down by the equivalent of the payment, at least in the short term. That;'s why XD dates are watched and why share prices fall on going XD.

So if RQIH had paid you a 2.9p divi, you'd still have your original 5861 shares but the price today could well be 88p, giving you cash in hand of £169.96 (divi) and shares worth £5157.68, total £5327.64. Instead, you now have 5673 shares @ 91p worth £5162.43 and you've had capital back of £169.96, total £5332.39.

Both of these figures are slightly less than your original £5392.12 investment. But that's a function of the stock market setting prices, which is outside the company's control. You could have had a dividend and the same number of shares at a lower price, or a capital repayment and fewer shares at a higher price. But the share price is not set by the company. I happen to think RQIH is undervalued and this is a (prolonged) buying opportunity - and that in due course, the share price will go up as the market reassesses the merits and intrinsic value of the company. But the market sets the share price, not the company. RQIH actually designed that 2.9p payout to give shareholders a choice of taking it as capital or income, which in certain tax situations could be useful, which is more than most companies do for their shareholders. I can't help but feel that you've not quite grasped the situation and understood it fully. You may not like the current share price, but that's a function of the market, not the company.

[envirovision] 22/12/2010 10:28

Red Ninja, they did not in effect pay any dividend at all, what are you talking about? Shareholders had a part of their shareholding cancelled at a discount to market value.

I had a holding of 5861 shares at 92p per share. £5392.12 total. The payment I had from Randal Quilter was £169.96. I now have just 5673 shares worth £5219.16.

I have value wise £172.96 worth of shares less now. In effect I got worse than "Nothing" I ended up with a negative return, I am worse off. In otherwords instead of Randal Quilter paying me a dividend, I ended up having to pay them.

This is not as you say "in effect by return of capital"

I know im not being a bit thick here, I have the number in front of me now. also you say "you were not devalued as your share of the company was not diluted" However the fact is I have less shares now.

I think we can safely say that that was a shareholder rip off. Any company which does this kind of thing to its shareholders should be treated with a large degree of caution IMO

[red ninja] 21/12/2010 16:55

Envirovision,

They paid a dividend in effect by return of capital linked with a capital consolidation announced on the 18th of August.

Next divi should be around March next year.

The capital consolidation was announced as a one off at the time, but you were not devalued as your share of the company was not diluted....

[envirovision] 21/12/2010 13:25

Does anyone know when or if they are likely to pay a dividend as the last one was skipped and they have been unable to provide any prediction or real guidance on future payments.

Also, does anyone think they are likely to further devalue shareholders equity again via capital re-organisation?

[lord gnome] 21/12/2010 12:08

It was drawn to my attention when another of my holdings, SDV, revealed that it had made an investment. It had, or appears to have, all the attributes that I look for. Low PE, high yield and a good discount to NAV. It appears to have suffered from the legal case and needs to prove that it can deliver in order to win back friends in the market. The only fly in the ointment that I can see is that the last divi was paid by a convoluted return of capital.

[18bt] 21/12/2010 11:57

Patience is the name of the game for this one. Has made some strategic moves which will be recognised at some point to go with the high yield.

[red ninja] 20/12/2010 23:57

Evening Lord G., some of us are still breathing, Growth Investor rated this a longterm buy and so it seems ..

[lord gnome] 20/12/2010 15:21

Afternoon all. If anyone is left alive on here, I have just decided to join you with a first purchase. Not showing on LSE, but may be on Plus or wherever.

[labatie] 19/11/2010 09:05

I'd be interested to know the company's response when you approached them to make your point