Tuesday, July 24, 2018

ASR Nederland intrinsic value still above price

A little over a year ago I wrote http://sinaas.blogspot.com/2017/05/asr-nederland-stock-seems-cheap.html since then the share price has increased by 40%.

Insurance is outside my circle of competence. ASR Nederland had great results 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 €3 920 million, based on 2017 sales, pass this test.

CURRENT RATIO:  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 13% (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 €5 EPS x 1,5 x €35 Book Value) = €62,7 and passes this test.

DIVIDEND €1,63/€37 = 4 %

Conclusion: ASR Nederland atill 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 (last year) ? : "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...

Questions, comments or E-mails welcome: ajb@valuemachinesfund.nl

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