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PSC Insurance Group Ltd PSI

Morningstar Rating
A$6.03 +0.01 (0.17%)
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Company Report

PSC Insurance: Ardonagh Offer Looks Fair and Likely to Proceed

We think it is highly likely that narrow-moat PSC Insurance will be acquired by United Kingdom-based insurance broker The Ardonagh Group, with the parties entering into a scheme implementation deed. Cash consideration of AUD 6.19 looks fair, representing a 19% premium to our stand-alone valuation of AUD 5.20 per share and 33% above PSC’s three-month volume-weighted average price to March 12, 2024—the date at which speculation of a potential takeover was first published. The deal is subject to shareholder approval, court approval, and approval from regulatory bodies, including the Foreign Investment Review Board and the Australian Competition and Consumer Commission. A scheme booklet will be sent to PSC shareholders in due course, and a vote on the scheme is expected to take place in September 2024. PSC shareholders do not need to take any action at this time.

Price vs Fair Value

PSI is trading at a 785% premium.
Price
A$6.03
Fair Value
A$2.27
Uncertainty
Medium
1-Star Price
A$1.99
5-Star Price
A$5.89
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

PSC's customer base and expertise in insurance products and services leave it well placed to benefit from higher insurance pricing. Commissions should increase as more customers seek expertise to navigate rising costs.

Bears

Insurance volumes and prices are closely tied to the insurance cycle and general economic conditions. Downside risk could increase in a recession.

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Trading Information

Previous Close Price
A$6.02
Day Range
A$6.026.04
52-Week Range
A$4.206.05
Bid/Ask
A$6.02 / A$6.04
Market Cap
A$2.20 Bil
Volume/Avg
877,026 / 663,164

Key Statistics

Price/Earnings (Normalized)
29.63
Price/Sales
7.50
Dividend Yield (Trailing)
2.32%
Dividend Yield (Forward)
2.32%
Total Yield
2.32%

Company Profile

PSC Insurance Group is an insurance intermediary which owns broker and underwriting businesses in Australia, New Zealand and the UK. It also runs the third largest broker network in Australia, allowing independent brokers to access support services for a fee. PSC Insurance derives most of its revenue from commissions (from insurers, ultimately paid for by PSC’s customers) based on gross written premium. Broker GWP is split between small to medium enterprises (45%), and corporates (55%). The UK business spans retail and wholesale broking, underwriting agencies, and managing agents which have the authority to underwrite on behalf of insurers.
Sector
Financial Services
Industry
Insurance Brokers
Stock Style Box
Small Growth
Total Number of Employees

Competitors

Valuation

Metric
PSI
AUB
WTW
Price/Earnings (Normalized)
29.6329.1317.07
Price/Book Value
4.672.592.76
Price/Sales
7.503.532.81
Price/Cash Flow
28.2925.9215.87
Price/Earnings
PSI
AUB
WTW

Financial Strength

Metric
PSI
AUB
WTW
Quick Ratio
1.021.120.33
Current Ratio
1.211.141.12
Interest Coverage
7.892.736.16
Quick Ratio
PSI
AUB
WTW

Profitability

Metric
PSI
AUB
WTW
Return on Assets (Normalized)
7.61%4.12%5.32%
Return on Equity (Normalized)
18.04%12.91%16.26%
Return on Invested Capital (Normalized)
12.05%9.59%11.25%
Return on Assets
PSI
AUB
WTW
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