ABG med kursmål NOK 11 "Rising like a phoenix from the ashes"

Fra fersk ABG-analyse av INSR:

"Rising like a phoenix from the Ashes

• 55% upside in the most interesting financial case for ’18

• Break-even in ’18e, EPS ’19e NOK 0.48, +70% for ’20e

• P/E ’19e of 15x down to 9x by ’20e; BUY, TP NOK 11

55% upside potential to our base-case target price

Insr Insurance Group ASA (Insr) is, in our view, the most interesting non-life insurance company at Oslo Børs. Discarded by investors in the past after a previous failure (see Appendix 1), we see the company now rising like a phoenix from the ashes to make a successful return to profitability during 2018 and expect confidence in the stock to return with positive underwriting. We see 55% upside potential from the current share price; we initiate with a BUY recommendation and NOK 11 target price.

Financial turnaround possible due to scale effects

In our view, this is the management turnaround case that could work. Insr’s acquisition of Nemi should be completed during 2018. As the two companies lack both scale and capital, it is difficult for them to become profitable standalone insurance companies. Joining forces and adding capital will enable them to scale benefits from cost synergies and bring down the re-insurance share. We expect Insr to hit break-even by 2018 and we forecast net profit for ’18, ’19 and ’20 of NOK 6m, NOK 65m and NOK 109m, respectively. Q417e is still a net loss of NOK 113m.

P/E ’20e of 9x is too low; initiating with BUY and TP NOK 11

With the extreme profitability the Nordic P&C insurance players enjoy, even before run-off gains, a P/E of 9x by 2020e is too low. We believe room exists for Insr’s wholesale model as the larger incumbents are not too keen to compete against themselves by white-labelling their own products. We believe now is a favourable entry point for this most interesting financial turnaround case for 2018, and see even further upside in our different scenarios (see valuation section); (i) faster synergy take-out during 2018, (ii) a 1pp lower claims ratio and (iii) an even lower re-insurance share point to P/E of ~9x and 6x, respectively, for ’19e and ’20e, both far too low vs. the sector’s 13x average history. We trust in management’s ability to reach our base case with additional potential, none of which is included in the current price."