• Portfolio manager Taylor Collison believes NobleOak and Omni Bridgeway could outpeform
  • The fundie has released its new recommendations on these two stocks

Portfolio manager Taylor Collison has put out an Outperform and Market Perform recommendations for these two financial stocks on the ASX.

 

NobleOak Life to Outperform

NobleOak Life (ASX:NOL) is a Sydney-based $150m capped insurer that provides coverages including life insurance, income protection, permanent disability and small businesses insurance.

Taylor Collison has just put out an Outperform recommendation for NOL, with a 12-month price target of $2.14 (vs current price $1.80).

The fundie says that regulator APRA’s data and its own analysis suggest that NobleOak’s underwriting standards are of high quality, resulting in lower claims than its peers.

APRA shows that on average, claims represent approximately 50% of Australian insurers’ annual premium.

Since 2018 however, NOL’s claims have averaged only ~20-30% of annual premiums, suggesting that they are underwriting at a higher quality.

In addition, NobleOak’s customers are of high value, resulting in 4-5% lower lapse rates than its peers.

The lapse rate measures the percentage of an insurance company’s policies that have not been renewed by customers.

Taylor Collison believes this is occurring for two reasons.

Firstly, NOL’s screening process is more stringent, taking on less risk than its peers on average. And secondly, NOL’s target demographic is younger, leading to a book that is more likely to renew their policy on average.

NobleOak has scaled its portfolio from 15,000 lives insured to more than 100,000, and Taylor Collison is confident that NOL can continue to win market share without taking on risk.

 

Omni Bridgeway to Market Perform

$1 billion capped Omni Bridgeway (ASX:OBL) meanwhile received a Market Perform recommendation from Taylor Collison, without a target share price (current price is $3.95).

Omni is in the niche business of financing and investing in litigation, dispute resolution, and enforcement matters in Australia, the US, Canada, Asia, Europe, the Middle East, and Africa.

The company has a team of around 200 specialists in law and finance, working for individual claimants, law firms, corporations, and sovereigns.

There are a few main reasons why Taylor Ellison likes Omni as an investment.

First, Taylor says Omni is on track to deliver the upper end of its FY23 $550-600m commitments forecast range after a very strong Q2.

Secondly, Omni is sitting on a huge cash stockpile of approximately $200m ready to be deployed.

In addition, OBL has access to undrawn debt capital of up to $100 million under the $250 million debt facility established in May last year.

Taylor predicts that Omni will generate a loss for H1, but this could present investors with a buying opportunity ahead of what could be a much-improved FY24.

The fundie also says that Omni should be valued like an alternative asset fund manager. The fundie says Omni has a high barrier of entry that prevents competitors from replicating its footprints and brand presence globally.

 

Share prices today:

 

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