COMPANY COMMENT: Sovereign; SA insurance firms in India

THESE have been strange days indeed for Uitenhage-based poultry producer Sovereign Food Investments.

After touching a 12-month high of 925c in early February, the company’s shares were shooed back to as low as 760c last week as the market nervously awaited an updated trading statement.

Sovereign issued an initial trading statement (covering the year to end February) on February 17, indicating — as is required by JSE regulations — that its earnings would be more than 20% higher than those of the corresponding period last year. A little more precisely, earnings and headline earnings were expected to be at least 70c per share and 72c per share.

If the market was underwhelmed by that earnings range then at least a few punters took some heart from the fact that Thursday’s updated trading statement pencilled in earnings and headline earnings growth of more than 50%, offering a more sumptuous range of 88c per share and 90c per share.

Not much can be read into the pluckier share price following the latest trading update, because volumes were awfully thin. But at least the market now has a fundamental underpin for Sovereign (trading on an earnings multiple of less than 10 times), and perhaps there will be a tad more flight in the share price once the audited numbers have been more carefully scanned.

One suspects a renewed commitment to a share buyback programme might set value-conscious punters aflutter again

SANLAM and Old Mutual can now boost their bottom line in India by increasing shareholdings there after India’s parliament passed a law relaxing restrictions on foreign ownership of insurance companies from 26% to 49%

Old Mutual Emerging Markets seemed excited, and quickly announced it was on standby to increase its shareholding in line with shareholder agreements. Old Mutual has a life insurance joint venture with Kotak Mahindra.

Old Mutual Emerging Markets CEO Ralph Mupita said a valuable and successful partnership had been built up with Kotak Bank over the last 12 years. But he declined to say how much would be invested to up its stake.

Sanlam has already earmarked about R700m to increase its stake in its Indian general insurance business to 49%. In India Sanlam is invested in Shriram General Insurance through Shriram Capital.

The Indian market provides access to about 1.2-billion people, so the relaxation of the foreign ownership limit should have a meaningful effect on both Sanlam and Old Mutual’s bottom line. Meanwhile MMI has a memorandum of understanding with Aditya Birla Financial Services for a health insurance joint venture.

Curated from: Sovereign; SA insurance firms in India

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