Kuwait Projects Company (KIPCO) said that it has signed a deal with Fairfax Financial Holdings Ltd (FFH.T) to sell a 39.2% stake in Gulf Insurance Company (GINS.KW). KIPCO sold the stake at US$208.6mn, at US$3.14 per share and KWD 0.900 per share. The current market price stands at KWD0.620 per share as on 20th September 2010.
Fairfax Financial Holdings
Fairfax Holdings is leading commercial insurer in Canada since 24 years, it is also present in US, Asia, South America, Dubai, Jordan and Poland. It is a renowned top 5 reinsurer in US and top 20 in the World. The company has been buying stakes in insurance companies worldwide.
Valuation
As per our estimate at the CMP of KWD0.620, the stock trades at 6.7x and 1.2x FY13E P/E and P/BV. The stake sale at KWD0.900fils per share translates into P/E and P/BV of 9.8x and 1.7x on FY13E basis. We believe it is not expensive considering the company’s presence in MENA. The underlying penetration rates which stand at less than 1% in many GCC countries highlights the significant growth potential in the company.
GIC’s stake of 55% in Arab Orient Insurance Company
It is also to be noted that KIPCO already has stake of 55% in Arab Orient Insurance Company and Fairfax Financial Holdings also has a stake of 20%.
