GRUPO CATALANA OCCIDENTE: NEUTRALISING NON-PAYMENTS... BUY! (ANÃLISIS BANCO SABADELL)
Neutralizing defaults. BUY.Once most of the doubts surrounding default in Credit Insurance are over, the downward risks in the share price are limited, in our view. GCO has signed (for 50% of premiums) quota share reinsurance contracts, neutralising the effects of a 130% CR BS(e). With this in mind, we do not believe that the business profitability will return to 2019 levels until after 2022 BS(e). However, it is not a S-II event (in a stressed scenario >170%), not jeopardising the dividend. Furthermore, GCO will keep its M&A DNA under control, being accretive for shareholders. Our new T.P. with our recently revised estimates in a V-shaped scenario stands at around € 27.00/sh. +33.83% upside) and we reiterate BUY.
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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