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Helios Underwriting - Huge capacity increase follows capital restructure

Helios Underwriting reported FY24 expected underwriting capacity of £501.8m on 15 December 2023, a huge 69% increase over the past year. Capacity growth of £28m reported at H123 is followed by a further expected £177m of tenancy capacity, some only becoming active during H124. The large addition was made possible by a significant capital restructure where Helios raised US$75m in seven-year unsecured debt at a coupon of 9.5%. The syndicate underwriting operating result outlook has meaningfully improved on the back of this increased exposure, driving a strong upgrade in our FY25 earnings forecast, although FY24 was downgraded to allow for a sharp uptick in financing costs. After allowing for the additive impact of the company’s ongoing share buybacks, our FY24 EPS forecast has been cut by 5%, while our FY25 forecast has been lifted by 10% to 37.6p. This upgrade, combined with a sharp reversal in gilt yields, has resulted in an 11% increase in our valuation to 280p/share.