The IPO, which was issued at an offer price of 320bz per share, has been rated at 345bz per share, an upside of eight per cent on the offer price with a recommendation as an ‘above average’ issuance, according to a press release.
Oman’s leading brokerage firm Gulf Baader Capital Markets (GBCM) said, ‘Our weighted 12 month fair value of NLGIC works out to be 345bz, an upside of eight per cent on the offer price. Overall, we rate the NLGIC IPO as an above average issuance giving investors a good investment opportunity in a leading insurance company in Oman with exposure in the GCC markets. Our valuation hasn’t considered the introduction of mandatory health insurance in Oman.’
U-Capital in its IPO report recommend to ‘subscribe’ for the IPO of NLGIC. ‘The fair value of the company comes out at 358bz per share, an increase of 12 per cent on the offer price. At the offer price, NLGIC is trading at 2018 P/E and P/Bv multiple of 9.1x and 1.55x, respectively. Our estimates are based on NLGIC prospectus projections which do not incorporate additional income from mandatory health insurance’, U-Capital said.
U-Capital emphasised on sound operational and financial performance of the company, based on the fact that over the last four years NLGIC has consistently shown profits despite various challenges. ‘In 2016, NLGIC profit went up by eight per cent to RO4.7mn and for 2017 the company has projected an income of RO8mn. As of September 2017, the company made profit of RO7.1mn, which is 89 per cent of its estimated profit for the full year 2017’, U-Capital added.
U-Capital further said, ‘Mandatory health insurance is set to be introduced next year in Oman. We believe this proposition has wide ranging positive impact on NLGIC, as it is the leader in this segment. As per our conservative analysis, the net income of NLGIC for 2018 would increase from RO9.3mn to RO11.6mn and earnings per share would rise from 35bz to 44bz. At the same time, dividend yield of the company for 2019 would rise from 5.5 per cent to 6.9 per cent assuming same 50 per cent payout and PE multiple would change from 7.9x to 7.3x’.
NLGIC recently announced that an agreement has been reached to acquire Inayah TPA LLC, a UAE-based third party medical claims administrator. In addition, NLGIC has also received the license to operate in Kuwait.
NLGIC has been a market leader in health insurance in the sultanate and has a firm market presence in the UAE and other regional markets.
This has resulted in some distinct results for the company, especially returns on equity.
The company’s shareholders’ worth has been increasing consistently from RO19.8mn in 2013 to RO44.4mn in 2016 (which includes issued and paid up share capital increase of RO16mn during 2016).
NLGIC believes that with the company’s current market standing supported by its carefully crafted business strategies for various operational segments, the shareholders’ worth would increase to RO77.7mn by 2021 and return on equity will increase from 17.1 per cent in 2017 to 20.6 per cent in 2021.