NEM Insurance Plc hits slow mode

2
Stock pick, NEM Insurance, NSE, CardinalStone, AFIG Funds

NEM Insurance had a slightly turbulent 2018, due to issues pertaining to its 2018 AGM, though the storms seem to have settled. However, the company is in line to deliver a flat result, compared to the last two years.

About the company

NEM Insurance was incorporated in 1970. The company was listed on the Nigerian Stock Exchange (NSE) in 1989, following its privatization by the Federal Government. The firm operates in the general insurance segment.

Bua group

Recent results

Results for the nine months ended September 30, 2018 show that gross premium written increased from N11 billion in 2017 to N12.5 billion in 2018. Profit before tax dipped slightly from N2 billion in 2017 to N1.8 billion in 2018. Profit after tax also dropped slightly from N1.69 billion in 2017 to N1.6 billion in 2018.

Pricing

Current Share Price: N2.51
Year High: N2.51
Year Low: N1.72
Year to Date Return: -7.04%
One Year Return: 38.12%

Price Outlook

The Nigerian Stock Exchange has rallied in the last few weeks, as some foreign investors take positions in anticipation of a peaceful election, and due to the US Fed halting on increases in its interest rate. The stock has underperformed the NSE, down 7% year to date.

Possibilities of a rally are quite low, more so as its 9M 2018 results are flat year on year.

Price valuation

NEM is currently trading at a price to earnings ratio of 4.74 times earnings, far lower than the average PE on the Nigerian Stock Exchange. It is, however, trading within a similar range to its peer AIICO Insurance which is trading at 5.6 times earnings.

Outlook

The company is most likely ending up with a flat 2018 result due to a rise in reinsurance expenses, after upbeat 2016 and 2017 full year results.

Audited full year and Q1 2019 results will give an inkling if this is a onetime occurrence.

Coronation Research

NEM is one of the few insurance firms that have done fairly well in the last couple of years, leading to institutional investors such as VFD (which exited last year) and AFIG Funds taking a position. That is unlikely to change anytime soon.

2 COMMENTS

  1. How can you possibly say AIICO trades at a PE of 11? What is was their earning per share and share price. You guys will have to be more careful in your reporting so as not to miss lead the investing public. I see too many inaccuracies on this site and I have learnt to double check assertions made here.

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