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.

Equity Bottom-Up

Linea Directa Aseguradora / Equity Bottom-Up

As a follow-up to <a href="https://www.smartkarma.com/insights/bankinter-linea-directa-spin-off" target="_blank" data-smartkarma-citation="insights:35406" rel="noopener">Bankinter: Linea Directa Spin-Off</a>, I am updating my TP on <a href="https://www.smartkarma.com/entities/linea-directa-aseguradora-sa" target="_blank" data-smartkarma-citation="entities:34832:1" rel="noopener">Linea Directa Aseguradora (LDA SM)</a>, pioneer of direct insurance sales in Spain. LDA is trading at 16.4x 22e P/E (on Capital IQ consensus estimates), which I believe it is too cheap for a company of this quality.
Línea Directa's high-quality cash flows are undervalued. The company has a strong cost control policy, which gives it a competitive advantage over its peers. I believe there are more opportunities for capital management, which should allow the company to increase dividends to shareholders and increase its ROE.
Investors often focus too much on share price movements for auto insurers and forget to recognise the price discipline of some of the best companies. LDA has no bad years and I believe the market seems to overlook its low earnings volatility and track record. In addition to the potential rerating of the shares, LDA offers a solid dividend. LDA intends to distribute between 80% and 90% of its profits, which in my opinion is a clear sign of safe, attractive and stable growth. The 2022e dividend yield is 5.4% (Capital IQ consensus).
LDA offers an attractive proposal, taking into account its combination of solid growth and underwriting. LDA business is on a par with other companies in the sector, such as Admiral. Recommendation is long LDA SM, TP €2.09 (19x 22e P/E Capital IQ consensus), 20% upside to the closing price on 29 October.

As a follow-up to Bankinter: Linea Directa Spin-Off, I am updating my TP on Linea Directa Aseguradora (LDA SM), pioneer of direct insurance sales in Spain. LDA is trading at 16.4x 22e P/E (on Capital IQ consensus estimates), which I believe it is too cheap for a company of this quality.
Línea Directa's high-quality cash flows are undervalued. The company has a strong cost control policy, which gives it a competitive advantage over its peers. I believe there are more opportunities for capital management, which should allow the company to increase dividends to shareholders and increase its ROE.
Investors often focus too much on share price movements for auto insurers and forget to recognise the price discipline of some of the best companies. LDA has no bad years and I believe the market seems to overlook its low earnings volatility and track record. In addition to the potential rerating of the shares, LDA offers a solid dividend. LDA intends to distribute between 80% and 90% of its profits, which in my opinion is a clear sign of safe, attractive and stable growth. The 2022e dividend yield is 5.4% (Capital IQ consensus).
LDA offers an attractive proposal, taking into account its combination of solid growth and underwriting. LDA business is on a par with other companies in the sector, such as Admiral. Recommendation is long LDA SM, TP €2.09 (19x 22e P/E Capital IQ consensus), 20% upside to the closing price on 29 October.

Línea Directa Aseguradora: Overlooked and Cheap