- Robust pipeline of new investments
- Substantial cash pile
- Positive insurance market outlook
- 21 per cent discount to pro-forma NAV
Aim-traded insurance sector investment company BP Marsh & Partners (BPM:470p) has delivered the upbeat pre-close trading update I had anticipated when I suggested buying the shares, at 420p, in my 2024 Bargain Shares Portfolio.
Although we will have to wait until the annual results on 11 June 2024 for the portfolio revaluation, it’s difficult to envisage a scenario whereby BP Marsh’s undiluted net asset value (NAV) per share will not surge through the 600p barrier at the 31 January 2024 financial year-end. On a pro-forma basis, BP Marsh’s NAV of £214.8mn (598p) has already risen from £189mn (526p) on 31 January 2023, but this excludes likely positive valuation uplifts to stakes in multiple investee companies including: Lilley Plummer Risks (LPR), a specialist marine Lloyd’s broker; and Stewart Speciality Risk Underwriting, a Canada-based managing general agency (MGA).
The narrative in the trading update was overwhelmingly positive, both for specific portfolio companies and the general industry market outlook. Indeed, the directors point out that the “ongoing consolidation trends in the insurance market show no indication of abating in 2024”, adding that “such activity remains a catalyst for substantial prospects for BP Marsh, both in terms of new investments and activity within our core portfolio”.
Bearing this in mind, having announced three portfolio disposals since October 2023, BP Marsh’s cash pile is set to rise to £88.2mn (246p), or more than half its market capitalisation, when the previously announced disposal of London-based CBC Insurance Broker completes. Moreover, this sum excludes £19.2mn of likely cash proceeds, and potentially far more, from BP Marsh’s holding in IFA Group, LEBC, albeit the cash will be released over a three-year period.
House broker Panmure Gordon also envisages NAV per share upside when the annual results are released in mid-June 2024 and has a 558p target price. It could prove conservative. Buy.
■ Special offer. Simon Thompson's books Successful Stock Picking Strategies and Stock Picking for Profit can be purchased online at www.ypdbooks.com at the special discounted price of £5 per book plus UK P&P of £4.95, or £10 for both books plus UK P&P of £5.75, subject to stock availability.
They include case studies of his market beating Bargain Share Portfolio companies outlining the characteristics that made them successful investments. Simon also highlights other investment approaches and stock screens he uses to identify small-cap companies with investment potential. Full details of the books’ content can be viewed on www.ypdbooks.com
