Sagicor Financial severely undervalued

Sagicor Cayman building.

The Barbados based Sagicor Financial is seriously undervalued with the shares selling at less than a half the multiple of the Trinidad based Guardian Holdings and its Jamaican based subsidiary Sagicor Group.
Sagicor Financial continues to reap success with net income for March quarter of US$39 million against a prior year’s US$27 million. Net income attributable to shareholders was US$20 million compared to the prior year, of US$17 million, an increase of 19 percent and continues the trajectory seen since they reported a loss in 2012.
For 2018 first quarter, the group adopted two new accounting standards effective January 2018 covering Revenue from Contracts with Customers and for Financial instruments. The standards change the way that financial instruments are recognised and measured. There was no significant impact on the implementation of both standards on the net assets of the Company Sagicor reported.
Total revenue for the quarter increased 5 percent to US$297 million, against US$283 million in 2017. Revenue included a one-time gain of US$5.3 million on the acquisition of the British American insurance portfolio but net investment and other income fell to $109 million from $115 million in the similar period in 2017. Policyholders’ benefits fell 5 percent to US$132 million, compared to US$138 million for the previous year. Operating expenses increased just 2 percent to US$118 million, compared to US$115 million in 2017.

Jamaica Sagicor Group contributes more than half of Sagicor Financial profits.

Group comprehensive income dropped to US$17 million, from US$32 million for the prior year, with shareholders’ comprehensive income of US$6 million, compared to US$21 million for the prior year. The decline in comprehensive income was mainly due to marked-to-market losses on our international bond portfolio.
Total assets amounted to US$7 billion, with liabilities of US$6 billion at the end of March with Group equity of US$932 million and equity attributable to the company’s shareholders of US$623 million. The Group’s debt was US$407 million with a debt to capital ratio of 30.4 percent.
Earnings per share for the quarter amounted 6.5 cents and continues the growth enjoyed in the 2017 full year of 23.7 US cents compared to 20 cents in 2016 and puts earnings for the full year for 2018 around 30 cents. The stock trades on the exchanges in Trinidad and Barbados, closed on the Trinidad and Tobago Stock Exchange, the more liquid of the two markets at TT$7.90 and trades at a PE of an attractive 4 times earnings, well below Guardian Holdings at around 10 times earnings.
Although, the group is based in Barbados, data shows Trinidadians as the major owners with 49.6 percent with Barbadian owing around 33 percent while more than half of the profits come from Jamaica.

IC has placed a BUY RATING on Sagicor Financial.

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