Is Continental Reinsurance A Buy/Sell/Hold ?


Nairametrics|Continental Reinsurance, the only listed re-insurance firm in the country today hit a new year high of N1.17 Naira per share. The company has also seen huge volumes trade this week. Almost 200 million shares have traded this week. The stock has traded at a year low of 96 kobo this year. If you bought the stock at the beginning of the year and held till date, you would have had a return of about 18%. Should one then buy sell or hold?

Continental Reinsurance has operations across Africa and benefited from the depreciation of the Naira last year through foreign exchange translation gains. Q3 2016 foreign exchange gains jumped from N318 million Naira in Q3 2015 to N4 billion Naira in Q3 2016. Earnings per share jumped over 100% from 15kobo in Q3 2015 to 36 kobo in Q3 2016. That leaves it with a price earnings ratio of 3 and a price to book ratio of 0.7 both within range.

Moroccan insurance group, Saham bought a majority stake in Continental Reinsurance in 2015. The company also has a consistent record of dividend payment. We rate this stock a HOLD at its current price range, for long term investors. Foreign exchange gains are one time and will not be replicated in 2017. For short term traders, while there might be a bit more upside in price appreciation, the stock is largely illiquid. A pull back in price may be near.

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