Greeeeeeeeeeat earnings! Obviously they cant make this number every quarter, but they dont have to....and its still cheap with a very low price to tangible book and lots and lots of earnings.
....risk reward seems decent. I mean they've had money losing quarters and the stock hasnt traded under these levels for any length of time before (its under tangible book right now)......if they show there's more demand for their product, like they claim in the conf calls, that upswing in demand will go straight to the bottom line, and plenty of upside.
Imo the selloff is due to what I said a few days ago..
First, as stated in the Conf Call, FNHC needs to raise cash in order to fund their spectacular growth. Some (or all) may come by way of an equity raise, and investors dont like getting ahead of stock offerings.
Second, also from the CC, the Sept qtr may be a tough one. Its always seasonally weaker....but this time FNHC stated in the CC that their reinsurance costs will go up an abnormal amount. Some of that was seen in the June quarter, but the brunt (2/3's of it) will hit the Sept qtr. Now, their rates are decent and the coverage is really good, however FNHC stated in the CC that for the first time they will aggressively add policies during Hurricane season (in the past they have not added policies b/c the risk is too high once reinsurrance is set). Therefore, FNHC had to purchase enuf reinsurance to cover what they estimate their policy count will be after they add all those policies (plus the tremendous growth in policy count that had occured year over year prior to hurricane season). While other Fl based insurers with no growth, like UVE, lowered their reinsurance bills, and others with decent growth (lower than FNHC), like UIHC, got flat rates, FNHC will be hit in the September quarter. Also, when you are growing as fast as FNHC, there are some upfront costs that may not be repeated as you acquire policies (like commissions/sales/marketing).
Now, in the mid term this is great news for FNHC because this tremendous policy growth will eventually lead to outsized eps numbers, and that may happen soon, maybe by the December quarter.
Nevetheless, imo, thats the reason for the selloff. Of course I could always be wrong.
Buying now seem like a good opportunity....especially considering that so far this hurricane season has been super light. And FNHC is TRADING UNDER BOOK, while UIHC, UVE, and HCI are trading between 1.45 an 2.65 times tangible book value! And FNHC is growing fastest by far!
matsky, they are basically a Florida Property and Casualty insurere, so they are exposed to Hurricanes. Now, they have fewer policies in the most effected areas of South Florida then in the past, and they are super conservative....they probably have the best reinsurance coverage of the Florida insurers......so thats great. Nevertheless, being a Florida carrier, they are exposed to Hurricane season.
But, there have been virtually no major storms (let alone hurricanes) so far this season in Florida (there was one storm in June...but that effected last qtr). We are just about 65% through hurricane season.
ballen, I agree with you. While I have seen some it from time to time, I think FNHC's stated need to build up surplus in order to fund requirements for their tremendous growth runs contradictory to a dividend increase. How can you raise what your paying out in a divvy at the same time you're trying to raise capital?
I think this is a good time to buy, considering all that I've mentioned before......FNHC is the highest growth company of the Florida P&C insurers, and at the same time it has by far the lowest price to book. Earnings may not be quite as stellar this qtr due to the increase expense (for the very short term), but they are bound to increase dramatically once starting this December quarter which starts in eleven days.
mutiny, the company did announce that they'd be doing a raise in the last earnings call, so imo, not a surprise. As for the dividend, I dont see why they'd stop it. First of all, most other insurer's (if not all) continued their dividends during secondaries. And ALL of FNHC's publically traded competitors continued with their dividend during recent cash raises, including UVE, UIHC, and HCI. And of course FNHC has stated that they are raising cash because they are growing so fast, and expect to continue to grow and gain market share from the FL competitors I just mentioned well into the future.
In the past few days insiders have bought 4,084,000 in the open market (as per the Canadian Insider site):
The President and CEO, Len Becker BUYS:
1,294,000 shares on 9/23 @ .45/share
260,0000 shares on 9/20 @ .432/share
50,000 shares on 9/20 @ .43/share
Independent Director, Howard Crone BUYS:
1,039,000 shares on 9/23 @ .45/share
470,500 shares on 9/20 @ .438/share
Independent Director, David Johnson BUYS:
900,500 shares on 9/23 @ .444/share
Independent Director, Robert Zakresky BUYS:
70,000 shares on 9/12 @ .395/share
Add another 1,000,000 shares of insider buying on 9/25 for PNCGF by two 'new insiders', brings the total to 5,084,000 shares bought by insiders in the past few days:
CFO, Daniel Toews BUYS:
500,000 shares on 9/25 @ .55/share.
Non Exec Chairman of the Board, John Brussa BUYS:
500,000 shares on 9/25 @ .50/share
..a situation TWGP finds themselves in. I mean these guys have rolled up and been buyers of insurance companies for years. All of a sudden they want to sell at the worst possible moment, while their share price is tanking?
TWGP may have some serious troubles, and the writeoffs may greatly exceed what they have estimated (publically) so far.
Scary time for these guys. Could be an opportunity, but their desperation certainly makes me very wary.
Many insurer's have, and probably do, trade below tangible book value. I've purchased many below book tangible book. And we have no idea how profitable TWGP was/is since they may not have been reserving correctly for years. They may need several hundred million dollar reserve chage +, in other case I have seen, smaller charges keep on going quarter after quarter for many quarters hitting earnings as the 'experts' they hire review their book of business for many years back. It looks like TWGP's loss adjustment expense was underestimated for a long time giving them false profits.
It is amazing that they are trying to sell the company instead of 'right the ship'....if the they weren't in serious trouble, why wouldn't they spend the next several quarters hunkering down and making proper corrections....let the share price rise back up, and then sell. They are selling at the lows, as if the company is in a distressed situation needing immediate assistance.
value66, I dont know them well, but in five minutes of dd I came up with these insurers trading for less than tangible book, I'm sure there are more:
huikh, not true at all. Plenty of companies put themselves up for sale that have a future. But doing it right at the worst point of distress in a company's history seems desperate. If its just a quick fix and simple one-time minor charge, why dont they spend one or two quarters 'righting the ship', and then they should be posting huge eps numbers again, and the stock price would double, and then out the company up for sale. Thats what most companies would do unless they were in deep trouble.
Don't you find it weird that they are abandoning ship after building up this company for years through many acquisitions? Doesnt that at least make you scratch your head and say why?
First of all, I know someone who dumped a position of significant size which led to the drop from the mid fifties to the mid forties. I added some around .45 for a trade. This investor was simply a bit tired in his CRCV investment and liked the short term outlook of other opportunities.
The '25% jump', imo, was just a quick rebound from the above mentioned sale to prior levels.
RE weak financials...I mean they havent really changed all too much, they've been weak. And with the transfer/purchase of property, you coul certainly argue their real estate is far better positioned than before.
When they first announced the possible deal (I think in April), I thought they' probably get it done by year end....so its still within my schedule. Nevertheless, the lack of updates is a bit worrisome (although I wasnt expecting much)....and there's no guarantees. Obviously these guys will do whatever is best for themselves.
It seems to me a mid .70's buyout is still a very good deal for the assets...but other than that what I've said I certainly dont know anymore than anyone else.
Tim, where are they talking about moving production to Italy...I didnt see it. Sometime during the next few months we should hear more about their Italian factory negotiations regarding number of workers and wages.
#$%$ quarter....but not very surprising.
CC should be interesting...hope you ask some good tough questions.
All in, the stock is still very cheap at these levels, and a dip lower would be a buying opp, imo.
...I know it was tough because of the technical and language problems.....but great job in focused and relentless questioning. Natuzzi could really use a translator for Pasquale....I mean he speaks English fine, but he just doesn't understand the questions.
1. re the five year plan - as I understand it, having a five year plan is required by the government as they negotiate with the unions and government to layoff and/or lower wages. Not sure if they needed all the outside firms to help them out, but if you believe what Pasquali stated in the CC, the information that will be offered when the plan is released in December will provide a ton of information on their expectations as to costs/expenses/manufacturing process changes etc. in the short run.
2.Obviously a rational person understands that a company buyback of shares makes sense when you're trading at a fraction of tangible book and you believe you have any sort of future in the midterm. However, while I am not an expert on the Italian market...the government and unions have much more power in Italy then in the US. I would think that spending company money on buying back stock, when at the same time entering intense negotiations to try and lower wages and cut redundant employees (Natuzzi v Unions and Government) by claiming that your Company needs these cuts to survive, may send the wrong message to the Unions an Government....that is that Natuzzi has excess cash, and that they expect things to turn around shortly.
I agree the monthly statements is a 'tightening' of the bank covenants. But increasing the max ratio of indebtedness/ebitda to 3.5 from 3.0 actually relaxes that covenant (at least as I understand it)...it allows BFDI to carry more debt per dollar of ebitda. Similarly, reducing the minimum Debt Service Coverage Ratio (from 1.3 to 1) also loosens that covenant....it means (as I understand it) that the minimum ratio of operating income to total debt service has been reduced....so the bank is now allowing BFDI to achieve a lower amount of income for the same amount of debt.
LTF, the plan was stated in Smulyan's filing on 9/17. He had already sold 25,000 shares....so now a total of about 30,000.