Broker tips: Beazley, Clarkson
Shares in non-life insurance firm Beazley gained on Tuesday after broker Berenberg raised its target price, saying that the stock’s recent underperformance “confounds reality”.
Beazley’s share price was up 4.6% at 527p as of 1215 BST. With the stock still down 21% since the start of the year, Berenberg expects major upside, lifting its target price to 850p from 825p and keeping its ‘buy’ rating.
“Beazley has been the second-worst-performing insurer in the SXIP, which, in our view, completely confounds reality,” said Berenberg analyst Tryfonas Spyrou. “Underwriting conditions across c60%+ of Beazley’s book are fundamentally among the best in many decades, while the asset side is also benefiting from a 5%+ recurring yield.”
Beazley’s net asset value per share increased by 14% simply by recalibrating for the new International Financial Reporting Standards that came into place on 1 January 2023 (IFRS 17) This “appears to have been entirely overlooked by the market”, Spyrou explained.
Beazley is a leader in speciality liability insurance and cyber insurance, and Berenberg believes that it has the capabilities and knowledge that out-compete rival firms.
“In our view it appears Beazley effectively also became a momentum trade on the back of cyber pricing, which is now unwinding and thus weighing down on the share price,” Spyrou said. “Nevertheless, we expect cyber to continue to be Beazley’s most profitable business line while property, where prices are rising to multi-decade highs, is second best. None of this appears to have been priced in.”
Canaccord Genuity has lowered its price target for Clarkson after the shipping company’s first-half results this week, but says that stock is still a ‘buy’ following recent falls.
The broker cut its target from 4,325p to 4,275p on Tuesday, a day after Clarkson reported pre-tax profit for the six months to June 30 came in at £52.2m, up from £42m a year earlier.
As of 1317 BST, the share price was 2,745p, having fallen 12.3% since the start of 2023.
The company, which provides ship broking services, digital tools and finance to the maritime industry, is on track to meet expectations this year, according to Canaccord analyst Damian Brewer.
Looking ahead, Brewer says: “We think Clarkson will continue to reap the reward of long-term higher market rates, while improving IT efficiency suggests gross broking profit per employee could rise (something 2022 already demonstrated) - which we think will support margins, profits and dividends.”
Beyond 2023, he says the company could “surprise to the upside” with dividend payouts, “which for an asset-light company is a key share price driver, in our view”.