Berenberg nudges up target price on Chesnara
Analysts at Berenberg nudged up their target price on UK life and pension consolidator Chesnara Plc from 328p to 333p on Friday following the group's first-half earnings a day earlier.
Chesnara reported £37m H1 cash generation on Thursday, 26% up on H124, a 207% Solvency II ratio, up 203% at its FY24 year-end position, and raised its interim dividend by 3% to 7.7p per share, in line with its annual 3% 20-year DPS growth track record. In addition, Chesnara also updated its guidance for solvency and leverage proforma for the impact of the HSBC Life UK £260m acquisition and for the related financing.
Berenberg, which has a 'buy' rating on the stock, said its new proforma estimates were that Chesnara's leverage ratio would be 25%, down previous guidance of 29%, which excluded the £150m RT1, and that the group's solvency ratio would be 198%.
The German bank updated its forecasts to include the impact of the HSBC Life UK deal and the related financing, stating HSBC Life UK will add over £800m to Chesnara's total cash generation, of which £140m will come in the first five years.
"We estimate that this means that there will clearly be enough cash generation to fund Chesnara's 3% annual DPS growth that we estimate for the next 20 years," said the analysts.
Berenberg added that Chesnara offers an 8.4% FY26 calendar year yield growing at 3% per annum.
"We value Chesnara conservatively on a dividend discount model at 333p per share, and the HSBC UK Life £800m cumulative cash provides comfort that the 3% pa growth is sustainable." it said.
Reporting by Iain Gilbert at Sharecast.com
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