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Quick Byte #2: Cover-More

Quick Byte #2: Cover-More

Following on from yesterday’s Quick Byte on the outcomes of the UBS Emerging Companies conference, today we’re taking a look at our analysts’ notes on Cover-More.

Like the handwritten notes on a uni student’s lecture pad, they’re rough and ready and in no way intended to be conclusive. You can’t base an investment process on a few lines of hand-written notes, but they may just add to the dialogue. Be sure to seek and take personal professional advice before engaging in any securities transaction.

Cover-More (ASX: CVO)

  • Standing room only – significantly more attendees for CVO than any other presentation
  • Favourable impression of CEO
  • Travel insurance a highly specialised part of the broader insurance market
  • Particular requirement to be able to integrate into travel agent systems; assist the travel agent in selling
  • CVO a sophisticated user of technology. Appear to be effective at using data to identify opportunities, profile customers, prompt sales opportunities and to improve conversion rates. Some big uplifts said to be experienced by channel partners on adopting CVO systems
  • Significant scope for margin improvement. CVO has claims processing capacity in several countries, starting to find savings in moving volume to lower cost centres
  • Summary: CVO have a strong domestic market share, indicating barriers to competition/ability to work effectively with channel partners, notably Flight Centre. With Flight Centre a globally competitive operator, this suggests scope for CVO to succeed in fast-growing Asian markets. Given systems orientation and lack of underwriting risk, it may be better to think of CVO as something more than an insurance business.

Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. An interesting company, however I am interested in there reasoning for such high pay out ratios. In today’s FY results, dividends for the year ( 2014 FY and 2015 Interim Dividends) was nearly 100% of cash flow from operating activities. I question whether management are interested in the the long term performance of the business or the short term movement of the share price post IPO.
    Your thoughts would be appreciated,

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