TSX:FFH - Post Discussion
Post by
retiredcf on May 02, 2022 9:46am
RBC Report
Their upside scenario target is US$975.00. Unable to post it all as the cutting and pasting is a real pain with this one. GLTA
Outperform
TSX: FFH.U; USD 543.21; TSX: FFH
Price Target USD 750.00 ↑ 675.00
Fairfax Financial Holdings Limited
Underwriting results continue to improve, a shift towards more yield in investment portfolio
Our view: The hard market continues to drive strong top-line growth and improved underwriting margins and management did an excellent job of protecting book value as interest rates rose, positioning them for improved investment results going forward. While the portfolio remains complex, the value positioning seems well suited to current market conditions. With underwriting contributions improving and the balance sheet as well positioned as we've seen it in some time, we see significant room for multiple expansion and continue to view FFH shares as a best-in-class value opportunity at about 0.85x book value.
Key points:
Estimates: We are lowering our 2022 net income estimate to $54.95 from $67.50, which primarily reflects the results in the quarter partly offset by improving investment income. Our 2023 estimate rises to $75.00 from $73.75, also reflecting higher investment income partly offset by more conservative margin assumptions. On an operating basis, we are revising our estimate to $55.19 from $55.78 for 2022 and to $63.29 from $62.05 for 2023.
Price target: We are increasing our price target to $750 from $675 (about C$950, up from C$875 at a 1.27:1 exchange rate). Our target remains based on 1.0x book value, which we now apply to ending 2023 book versus 2022 book previously. With good visibility to further book value growth together with a company generating underwriting profits in the middle of a hard market, we think 1.0x book value is a very attractive multiple.
Reported 1Q22 net earnings per share of $4.49 vs. $28.91 last year and our $17.72 estimate. Results included $214 million of net realized and unrealized losses on investments. On an operating basis, which excludes these items, the company earned $13.51 per share (RBC forecast was $14.78). Better than forecast underwriting results were offset by weaker than forecast associate losses.
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