ASR Nederland stock seems cheap? intrinsic value

Note: IPO in 2016 at 20 Euros by the Dutch government of the former Fortis insurance part of Fortis Bank that was bailed out during the Financial Crisis: https://en.wikipedia.org/wiki/ASR_Nederland 

Insurance is outside my circle of competence. ASR Nederland has had good results also in Q1 2017 with relatively few insurance claims, which can vary dramatically per year.

Benjamin Graham Defensive Analysis:

SECTOR: [FAIL] ASR is an insurance company and therefore this methodology is not applicable. 

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. ASR's sales of €4 328 million, based on 2016 sales, passes this test.

CURRENT RATIO:  not applicable. 

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS:  not applicable. 

LONG-TERM EPS GROWTH: [FAIL]  Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. ASR does not have a long enough track record as an independent company. The IPO was in 2016.

EARNINGS YIELD: [PASS] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. ASR's E/P of 15% (using last years earnings) passes this test.

Graham Number value: [PASS] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. ASR has a Graham number of √(15 x €4,1 EPS x 1,5 x €30 Book Value) = €51 and passes this test.

DIVIDEND €1,22/€28,3 = 4,5%

Conclusion: ASR Nederland seems priced well below intrinsic value with a margin of safety at the moment, similar to NN Group: http://sinaas.blogspot.nl/2017/02/nn-group-buy-now-intrinsic-value.html   

Risk: "Volgens Stef Smit van Consumentenclaim moet ASR op grond van het vonnis zo'n €7000 betalen aan de klant. Hij stelt dat er zo'n 200.000 polissen met de naam Falcon Levensplan zijn verkocht; ASR wil geen aantallen noemen." Possible downside of €1,4 billion ( €7000 x 200 000) is less than the discount between Graham Value and Price today. I can't find the specific provisions for the "woekerpolis" claims in the annual report...

See: www.beterinbeleggen.nl for more in-depth, qualitative analysis of "good" companies.

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com