Consolidated Hallmark Insurance is officially the lowest priced stock on the Nigerian Stock Exchange. The share price of the company fell to as low as 29 kobo at the close of trading on Thursday, 15th February 2018. Apart from trading at the lowest share price of 29 kobo, the stock also bears the infamous tag of the worst performer this year, having dropped by 42%.
The Nigerian Stock Exchange yanked off the decades-long 50 kobo price floor which had protected stocks from falling below the 50 kobo. Following its removal, we now have about 20 stocks trading below 50 kobo, as investors who have long held on these stocks without a chance of selling now offered an option to exit via lower share price.
At 29 kobo, the company is also trading at a trailing twelve-month price to earnings ratio of 8.9x, price to book ratio of 0.39x and a dividend yield of 6.9%. On paper, these are not bad looking numbers, thus we wondered why this stock is being battered by investors.
A look at this table could provide some clues;
- A quick glance at the table above reveals that the stock’s decline commenced on the 2nd of February 2017, right at the start of the removal of the 50 kobo floor price. It has lost ground every day since then.
- It is also interesting to note that the stock has attracted significant volume of trade (at least above its daily average) trading in millions nearly every day since the fall began.
- The company, however, has an outstanding share balance of about 7 billion units suggesting that the volume being traded is not significant enough to suggest a sell-off.
- Insurance Companies quoted on the Nigerian Stock Exchange have been performing poorly when it comes to their results. However, this company is not one of such. In fact, a look at its 2017 9 months results (its latest yet), reveal it reported a profit N207.8 million up from N196 million a year earlier.
- In terms of its insurance business, it reported an underwriting profit of N836 million suggesting that its insurance business is making money
- The company also has retained earnings of N114 million and a net asset of N4.49 billion. It also has a fairly good balance sheet with a total asset value of N8.1 billion compared to the N7.8 billion reported at December 2016.
- However, the stock has a woeful return on equity of less than 5%, very poor by industry standards.
- The reason for the company poor returns on equity can be traced to its Management Expenses.
- The company gulped a whopping N1.2 billion (2016 9 Months: N848.3m) on management expenses in the period under review, nearly wiping out the Gross operating income of about N1.7 billion.
- Despite its weak fundamentals, we have seen insurance stocks that are worse.
- Consolidated Hallmark carried out a rights issue late last year raising about ₦500 million by issuing 1 billion shares at 50 kobo per share.
- It is thus likely that the impact of the share sale will further affect its current earnings per share.
- Investors who own the shares probably recognized this challenge and are selling off fast to avoid holding on to a stock with limited intrinsic value.
Consolidated Hallmark Insurance Plc (formerly Consolidated Risk Insurers Plc) was incorporated on 2 August 1991. The Company changed its name from Consolidated Risk Insurers Plc to Consolidated Hallmark Insurance Plc following its merger with Hallmark Assurance Plc and The Nigerian General Insurance Company Limited in line with the consolidation reform of NAICOM announced in 2006. Consolidated Hallmark Insurance Plc came into effect from 1 March 2007.
The group comprises of Consolidated Hallmark Insurance Plc and its subsidiary – CHI Capital Limited. CHI Capital Limited also has two wholly owned subsidiaries, Grand Treasurers Limited and CHI Support Services.
CHI Capital Limited is a fully owned subsidiary of Consolidated Hallmark Insurance Plc. It carries on the business of consumer leasing. CHI Capital Limited acquired 100% interest in Grand Treasurers Limited, a CBN licensed finance company, in December 2010 with the purpose of carrying on financing activities. CHI Capital Limited also owns 100% interest in CHI Support Services Limited which is into the business of vehicle tracking