European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Línea Directa Aseguradora: Overlooked and Cheap

Event-Driven

On 28 April, at market close, <a href="https://www.smartkarma.com/entities/bankinter-sa" target="_blank" data-smartkarma-citation="entities:21253:1" rel="noopener">Bankinter SA (BKT SM)</a> distributed in kind to its shareholders the issue premium of €1,184 mn euros (82.6% of the total value) of Línea Directa Aseguradora (LDA). Bankinter shareholders registered as such at the close of 28 April, received one LDA share for each Bankinter share held, so there will be no IPO. 
LDA will thus debut on the Madrid Stock Exchange on 29 April.
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The return on equity (ROE) offered by LDA is one of the highest in the sector, exceeding 35%. LDA has agreed to pay out over 70% of its profits, which should translate in a dividend yield between 6% and 7%, for a stock with income certainty and good growth prospects.
There is the possibility that, in the medium term, LDA reduces somewhat (to 40-60%) the payout to invest in market and product expansion (house and medical insurance). By gaining size, it could become an appetizing prey for a larger group.
The company will debut with a P/E between 12x and 13x. At that level, it seems an attractive price, in my view. Other European general insurers are trading at 17x, thus there should be some upside. LDA has no debt and a healthy balance sheet.
There should be demand for the shares on its debut. Recommendation is long LDA, TP €1.71 (Fwd P/E comparables based).
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On 28 April, at market close, Bankinter SA (BKT SM) distributed in kind to its shareholders the issue premium of €1,184 mn euros (82.6% of the total value) of Línea Directa Aseguradora (LDA). Bankinter shareholders registered as such at the close of 28 April, received one LDA share for each Bankinter share held, so there will be no IPO. 
LDA will thus debut on the Madrid Stock Exchange on 29 April.

The return on equity (ROE) offered by LDA is one of the highest in the sector, exceeding 35%. LDA has agreed to pay out over 70% of its profits, which should translate in a dividend yield between 6% and 7%, for a stock with income certainty and good growth prospects.
There is the possibility that, in the medium term, LDA reduces somewhat (to 40-60%) the payout to invest in market and product expansion (house and medical insurance). By gaining size, it could become an appetizing prey for a larger group.
The company will debut with a P/E between 12x and 13x. At that level, it seems an attractive price, in my view. Other European general insurers are trading at 17x, thus there should be some upside. LDA has no debt and a healthy balance sheet.
There should be demand for the shares on its debut. Recommendation is long LDA, TP €1.71 (Fwd P/E comparables based).


Bankinter SA

Bankinter: Linea Directa Spin-Off