National Bank Looking for Near Double National Bank Financial analyst Jaeme Gloyn has “strengthening confidence” in the growth prospects for Trisura Group Ltd. following the completion of its $53-million equity offering,
“We estimate pro forma available capital now stands at a solid $125-million to $135-million (including increased debt capacity),” said Mr. Gloyn, resuming coverage after coming off a research restriction.
He expects the proceeds from the deal to help fund an acceleration in growth of the specialty insurance provider’s U.S. Surety strategy, including establishing a dedicated balance sheet, and also sees it poised to benefit from stronger-than-anticipated growth in its business both in Canada and the United States.
“While less tangible than the former two points, but equally important given recent industry events and TSU’s isolated issue with a struggling program, we believe the equity raise enhances the Trisura narrative with key stakeholders, e.g., MGAs, reinsurers and rating agencies,” said Mr. Gloyn. “Moreover, we believe the raise further strengthens TSU’s competitive position relative to U.S. Fronting peers, given the company’s larger balance sheet (US$50-million shy of becoming only the second fronting carrier to reach category Size 10) and greater operational diversification (i.e., not just a fronting company).”
The analyst reiterated an “outperform” recommendation and $60 target for Trisura shares. The average is $54.
“Our adjusted diluted EPS of $2.19 in 2023 (was $2.20), and $2.47 in 2024 (was $2.53) reflect the modest 3.5-per-cent share count dilution, partially offset by attractive investment returns on the capital raised (we did not revise growth forecasts),” he said.
“Trading at approximately 12 times on consensus 2024 EPS suggests significant upside to peers trading at 23 times.”
Elsewhere, TD Securities’ Marcel McLean resumed coverage with a “buy” rating and $57 target, while BMO’s Tom MacKinnon trimmed his target by $1 to $49 with an “outperform” recommendation.
“Updated forecast reflects dilution, partially offset by increased investment income; net result is a 2-per-cent decline in operating EPS and 2-per-cent reduction in target price,” said Mr. MacKinnon. “This is a positive development in that it helps de-risk the regulatory approval process for recently announced acquisition of a U.S. Surety Treasury-listed platform, demonstrates commitment to growing expanded distribution partners, and supports continued growth in Canada/U.S.”