I've made some quite heavy additions to my already reasonably sized holding in RQIH.
Why? I believe that the company has turned a corner and has a good chance of growing from this point. It's on a fair multiple of NTA and offers a decent yield. In short it has a good chance of being a baby Beazley or Catlin, both of which used to be part of my portfolio.
I've also added a reasonable quantity of BPM, which operates in the same sector (and used to have a stake in RQIH).
the best sign for me is that institutions are very keen to give them capital to deploy into their area of expertise. and the mgt is very very confident of prospects in that businesses. In my experience you dont see that level of optimism in many companies or markets.
i also like that Brian Marsh of BPM is a big fan and shareholder of the business. he has shwon himself over 20 years to be connected, conservative and an expert in his business area. I see RQIH as very similar. It appers quite dull with modest growth but this compounds to be significant over time.
The divi yield of 6% is a very nice annual return regardless. I think given the track record and future prospects the prospective yield should be closer to 5%.
And there is great comfort from the chart break out to ATH, on reasonable volume recently and relative outperformance. Make sure you using a decent data source that needs to have adjusted for the capital buy backs in previous years.
Results out. You have to look past exceptional gains, and if you do, what you see looks sensible and realistic. Very much in line with expectations. You shouldn't let the exceptional gain mislead you, though.
For me RQIH has bounced back from a bad patch, and is now a good business again.
A very strong Hold/Weak Buy.
I have a decent sized holding and will probably add.
Divi up 3.4% on the year to 8.9p.
Second half weighting in the forecast is something to think about.
The market likes these transactions with specialist self-insurers, the latest being Texas-based. R&Q has identified a specialist field of 'finality solutions' and management are using their skills and expertise to expand within that niche while continuing to:
"... grow commission income from its licensed (and rated) carriers in the US and EU/UK, writing niche and profitable programme business, largely on behalf of highly rated reinsurers ..."
I can see the sp slowly rising to 200p as the market digests this continuing story and the company remains generous in its rewards to shareholders.
Lets hope it continues to pump out these special share "dividends/capital returns" which morph into cash.I think we reached Y shares in October;whether after Z is reached it reverts to back to A remains to be seen......As R&Q is based in Bermuda I almost expected to feature in the Paradise Papers.
Based on the capital return cycle, increased optimism surrounding the company and on the recent, moderately successful open offer I would guess this perversely is not the time to be adding; but hopefully I'm wrong about that.
I took up my entitlement in full at 129p and added a further tranche also at 129p under the terms of the offer although I was scaled back by about 30 pc.
My strategy is to sit tight with an increased stake and possibly pick some more up under 120p (if seen) around New Year or February.
Would prefer to see it gain strength from here however.
1709 at 146p the amount of positive statements in the results today is rare to find amongst all 2,200 listed companies IMHO. In particular what I like is that RQIH operates in long tail and predictable businesses. i.e. they dont want to look silly so if they express publicly such confidence it is because they know that they have profits in the bag awaiting for time to pass before they can be announced. In particular they talk about the simplification of the business is a significant and a priority. It is reasonable obvious which bits of the business they will be disposing and this is expected to be materially above current book value. So they are obviously confident that the group will look differently after this disposal and that the disposal will add value. To be it is a very green flag. The management know something is going to happen but the market and market commentators cannot take it on board yet as it has not been announced. The evidence being the gradual rise in the price from 100p over the last year.
I value the business and recurring dividend at closer to 200p.
And expect that Simon Thompson will soon start to cover in the ic.
these shares are very very tightly held with only 18% in 'public hands'
so 8% traded must be a move by one of the big shareholders.....
of course the interesting bit is to see who has bought these shares in such a tightly controlled company as they must be there for the long term.
i would also deduce that RQIH mgt team would be not promoting the compnay until this trasnaction has been completed, so i think if anything there could be further good news around the corner.
They have been returning capital to investors via a distribution policy that was initiated in 2015. The advantage of this over dividends is that it is not taxable. You might conclude from this policy that the company is struggling but in fact earnings have held up quite well. The payouts have been handsome, equating to 6.5% tax free p.a. based on the current sp or well over 8% p.a. equivalent in dividends, depending on your tax band.
I'd say that regardless of the overall market direction this will either go sideways or rise as we approach the bigger August return of capital followed by the smaller November one. A comfortable buy/hold therefore in my opinion.
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