GRUPO CATALANA OCCIDENTE: BRILLIANT MANAGEMENT - BUY! (ANÁLISIS BANCO SABADELL)
Brilliant management. We raise our T.P. +25% to € 35.50/sh. BUYSince March lows the stock has rallied +85% (+25% vs. sector and +48% vs. IBEX 35), given the immunisation from Covid-19 claims in credit insurance with state-backed reinsurance, in addition to that from the CCS (Insurance Compensation Consortium in Spain). Why BUY at this level? (i) Taking all factors into account, the CR for credit insurance would total ~90% and ~85% in 2021-22 BS(e) (-5pp vs. previously), (ii) the claims ratio “is not materialising” thanks to Govt. support lent to the companies, (iii) the stock is still far (30%) from its share price high (€ 39/sh. in May’18), when it had a gross CR of ~79% and vs. 85% in 2022 BS(e) and (iv) Dividend: We expect GCO to pay out the originally-proposed dividend’19 against 2020 results: € 0.8821/sh. (3.0% yield).
Grupo Catalana Occidente is an insurance group based in Spain. Co. is engaged in insurance and reinsurance activities, including commercial, life, disability, and automobile insurance. Co. is also engaged in the sale of annuities and pension funds. Co.'s operations are organized along two businesses: Traditional business (insurance) and Credit Insurance business. Co.'s main markets are located in Spain, Germany, United Kingdom, France and the Netherlands. Co. maintains a presence in more than 40 countries.
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