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TOWER


Sector: Services

Industry:

WHY WE LIKE IT

The company has appeared on our radar because it seems very cheap. It trades on a forecast PE of about 5 times versus its competitors of 8 or 9 times. The reason is its big exposure to the Canterbury earthquakes in 2010 and 2011. The group has a relatively small capital base of NZ$141m (A$135m) which has been reduced by increased provisioning. Late in November the group announced that it's working to spin off this troubled liability. If it can do this, the stock will get re-rated, but it will occur with a capital raising. Investing in Tower is similar to investing in a biotech; it's a binary bet, although it must also be said that it's in nobody's interest for this insurer to go down the gurgler.

WHAT'S NEW?

There is about NZ$150m in outstanding claims relating to Canterbury. Tower is working with the Reserve Bank of New Zealand to assess the capital requirements for the proposed spin off or 'Run Off Co' which the company believes will involve a capital injection. It says that it is investigating potential sources for capital. A decision by the RBNZ should be made by the group's AGM in March, but one analyst notes that currently only about NZ$39m could be put into Run Off from existing reserves, plus the company is owed receivables of about NZ$100m, but these are subject to court action.

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  • Radar Rating Unlock
  • Market Cap ($m)* 219.2
  • Dividend Yield (%)* 0
  • NET CASH ($M) 102
  • * Data as of 13 March 2019

Latest Research Summary

TOWER: RESEARCH TIP UPDATE - JUNE 2018
06 Jun, 2018

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Previous Research

Research Date Radar Rating  
TOWER: RESEARCH TIP UPDATE - JUNE 2018 06 Jun, 2018 508571e4 View Research
TOWER: RESEARCH TIP UPDATES - DECEMBER 2017 21 Dec, 2017 05f6cbc5 View Research
TOWER: RESEARCH TIP UPDATE - AUGUST 2017 03 Aug, 2017 06e27ce2 View Research
TOWER: RESEARCH TIP UPDATE - JUNE 2017 29 Jun, 2017 3315bc4e View Research
TOWER: RESEARCH TIP UPDATE - MARCH 2017 22 Mar, 2017 0a015320 View Research
TOWER: RESEARCH TIP - DECEMBER 2016 07 Dec, 2016 461f17f3 View Research