Wednesday, 30 September 2015

Saga: a mega theme stock but is it good value?

I have never looked at Saga before but the company's sole focus on older generations is clearly pushing on an open door demographically:

Performance since IPO has been ok...

...and the announcement of a maiden interim dividend and hitting expectations generally sounds promising... does their expanding business plans covering insurance, travel, personal finance and generally working their database/cross-selling harder:

All sensible stuff.  I am not surprised they are talking positively about mid-teen percentage returns from investments in cruising (see here my thoughts on Carnival recently here)...

...but today the real money for the company is made more in the insurance space: 

Progress has been reasonable here but when translated into underlying growth (ignore the IPO costs falling out influenced EPS lines) the uptick in profitability was pretty modest/lowish single digit:

Similarly cash flow generation only edged up: 

On the latter point I liked the general rhetoric of the still newish CFO on capital structure / reducing debt...

...but I came away with the conclusion that maybe buying a speciality insurance only business (like Aviva - link here) and a speciality cruising business like the aforementioned Carnival may work better for me today.  A current x16s P/E rating is not dire but whilst I like the sound of the cross-selling and the deleveraging plus the all-encompassing positive thematic trend, Saga is not a share for me at the moment.  I have put a flag at the 180s, near the price level the company IPO'd at.  

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