Wednesday, 19 February 2014
MIDAS SHARE TIPS UPDATE: Our Quindell car insurance tip up fivefold, so what next?, Dyman & Associates Insurance Group of Companies
Insurance outsourcer Quindell was also quite small when Midas tipped it in May 2012, but the business has expanded dramatically and brokers expect further substantial growth.
Back then, the shares were 5.63p and the company was valued at £145 million. Today the shares are 321⁄2p, valuing the group at almost £2 billion. The second largest company on AIM, it is moving to the main market in April and chief executive Rob Terry hopes to be in the FTSE 100 within 12 months.
His ambition may well be achieved as brokers expect the stock to reach at least 75p within the year.
Quindell provides all the services that insurers offer to customers when they are involved in a car accident and it is not their fault. These include processing claims, medical and legal services and replacement cars.
The firm handles about 25 per cent of all non-fault motor claims in the UK and it is gaining new customers all the time. Insurers like to offload their claims management to Quindell because it is efficient and manages to settle claims far more cheaply than the insurers can.
Terry has won £300 million of new business so far in 2014 and revenue from this division is predicted at more than £1 billion this year, rising to £1.5 billion over the next two years.
Quindell is also involved in telematics, technology that shows insurers how safe their customers are, using black boxes or even smartphone apps to track their driving habits.
The Association of British Insurers predicts that 10 million drivers will have telematics installed in their cars or on their phones in the next five years and Quindell’s technology is the best on the market.
The company owns 49 per cent of telematics group Ingenie, which has been backed by football presenter Gary Lineker.
Over the next few months, Terry is expected to acquire the rest of Ingenie in an all-share deal worth more than £50 million, but Lineker will remain on board.
Quindell also works with insure the box, which owns Drive like a Girl, and it has signed telematics contracts with three large insurers in the US and one in Canada.
In 2012, Quindell delivered profits of £49 million. Its 2013 results will be announced in a couple of months, but profits are expected to surge to at least £128 million, more than doubling again in the current year to £278 million.
A maiden dividend of 0.1p is scheduled to accompany the 2013 figures, rising to 0.2p for 2014.
Midas verdict: Rob Terry is fiercely ambitious and as a 12 per cent shareholder, he is motivated to make Quindell succeed. The speed of growth has frightened some investors, but large institutions such as Prudential and Investec are backing the business, which is reassuring.
Existing investors should hedge their bets and sell 30 per cent of their shares, but they should keep the rest. New investors could find value at current levels.