Stockopedia comments Paul Scott - SAGA11 Oct 2024 12:40
Paul’s opinion - H1 results show quite a dramatic shift in profit away from the seemingly declining insurance businesses, and towards the much more profitable cruise ships. Together with the proposed deals to dispose of underwriting, and effectively sell the SAGA brand and some of the future broking profits in return for £80m cash up-front, then maybe we need to change how we value SAGA, and treat it as a travel company?
If the disposal & partnership deals complete, then that’s going to clear most of the non-ship remaining debt.
I don’t think we can really value this share now, because it’s going to fundamentally change shape, and we don’t have enough information about the insurance deals to ascertain what level of ongoing profits SAGA is likely to make from tying itself to Ageas.
Overall though, I like the sound of the deals, and that £80m could largely fix SAGA’s balance sheet, if it is booked as an exceptional profit, or it might have to be released over the 20 year period, I don’t know. Lots of questions, which make it almost impossible to value this share right now.
The core business will in future be the cruise ships, it appears. So maybe we could take a stab at valuation of that division alone, and assume everything else is worth only a little?
I would argue that the £193 mkt cap looks reasonable, for 2 owned & profitable cruise ships. The ships’ asset value is likely to more than cover the whole group’s net debt once the two deals above complete.
Given all the uncertainty here, I’m going to watch with interest from the sidelines. My hunch is that there could be quite good upside on this share, but I can’t measure it at the moment unfortunately, due to so much uncertainty and lack of information.
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