Growth Focus: PSC Insurance Group Limited (PSI)

by Patrick Taylor



Date of Data Capture: 25/11/2019

Name: PSC INSURANCE GROUP LIMITED (PSI)

Classification: Insurance Brokers

Current Price: $2.95

Market Capitalisation: $800 M

Forecast EBITDA Growth: 16.40%

Yield Estimate: 2.86%

Consensus Price Target: $2.80

# Covering Analysts: 2

Premium at Current Price: 5.08%

Price Target Trend (3-Month): Flat +-0%

Signal Timeframe: Quarterly-Monthly-Daily

Trend Bias: Up-Flat / Long-Medium

Indicators:
Short-term: Positive
Medium-term: Positive-Neutral
Long-term: Positive

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• PSI is continuing its recovery after emerging from a minor year-long consolidation five months ago, and this new-found strength is well supported by good reporting and forecasting.
• Performance has shown steady and strong growth from 2015, and this is expected to continue out to 2022 with recent acquisitions in the UK and US paving the way for future growth.
• Pricing shows a healthy move through major resistance structure in June, and then again with minor resistance falling in the last few weeks, the stock is building momentum here, with buy signals present across multiple timeframes.
Support ($): 2.90, 2.80, 2.70, 2.60 & 2.50.
Resistance ($): 3.00, 3.10, 3.20 & clear.


Growth Focus: PSC INSURANCE GROUP LIMITED (PSI)

Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.

When investing it is necessary to manage risk, and take steps to protect against potential worst-case scenarios, so it seems fitting that we are taking a closer look at PSC Insurance Group (PSI) as the growing underwriting specialist continues higher on good performance and looks like it could be a chance worth taking.

Emerging on the ASX in late 2015, PSI is a diversified insurance services company, operating throughout Australia, New Zealand, the United States, and the United Kingdom. Conducting business through brands like PSC Insurance Brokers, Chase Underwriting and Paragon the company provides services to more than 90,000 customers. The company has been seeing broad-based organic growth but also has a very active acquisition strategy, most recently seen expanding market share in the US and UK.

Performance has been strong and shows increasing revenue, earnings and profits up strongly since 2016, also supporting a fair dividend, though we are primarily attracted to the company for its growth prospects. And indeed the strong trend of expansion is set to continue with forecasts showing expectations out to 2022, primarily driven by strong sales and earnings growth. Analyst coverage is thin, so while there is a slight premium to consensus targets, these valuations are largely static and don’t correlate well to price performance.

Pricing history shows a brief but successful time on the market for PSI, where strong longer-term rallies in 2016 and 2017 were followed by medium-term consolidations before the stock plateaued-out in 2018. Since then the stock has tested overhead resistance at $3.20 twice last year before eventually moving into downtrend taking prices 30% lower by early 2019. Emerging from this constructive base 6 months ago we now find the stock crouched beneath overhead structural resistance at $3, but with good longer-term momentum building, we think they look good here.

With an attractive combination of strong organic growth and an acquisition strategy carving out international market space we believe PSI looks good for an entry here, and if expected gains come through as expected, this expanding insurance company could have you covered.

Disclaimer

This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.