Why Shares In RSA Insurance Group plc & JQW PLC Are Being Decimated Today

RSA Insurance Group plc (LON:RSA) and JQW PLC (LON:JQW) are troubled, for very different reasons, argues this Fool.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As a result of recent deterioration in the trading performance of Zurich’s general insurance business, Zurich has terminated discussions with RSA regarding a possible offer,RSA Insurance (LSE: RSA) said today.

Its shareholders might have to wait some time now before receiving a brand new offer for the holdings — but that was a risk I already highlighted on 7 August when I wondered whether it was too early for a change of ownership at the British insurer.

Inevitably, its stock was hammered today, falling more than 20% in early trade. 

No Deal 

Zurich has confirmed that the “due diligence findings were in line with their expectations” and, while an offer had not emerged, Zurich “had not found anything that would have prevented them from proceeding with the transaction on the terms announced on 25 August“.

Back then, RSA announced that it had received “a revised proposal from Zurich regarding a possible all cash offer for the Company at 550 pence per ordinary RSA share“.

RSA now trades at 400p a share, and I am confident that its management team will continue to deliver on its promises. Moreover, its stock does not seem incredibly expensive at 1.1x book value.

That said, earnings multiples do not point to ‘bargain territory’, while forward core operating margins and cash flows may end up disappointing the bulls — all of which suggests to me that there might be better alternatives than the general insurance sector in this market. My advice is to keep RSA on your radar while paying attention to any news associated to new capital requirements across the industry. 

Finally, RSA also noted today that since Zurich’s unsolicited interest on 28 July, it had made good progress in the delivery of its restructuring plan — indeed, it agreed to sell its Latin American division to Grupo Sura for about £400m earlier this month, in a deal that will strengthen its capital position. 

Down Down Down

Elsewhere, such a tiny company such as JQW (LSE: JQW), whose stock had plunged by 41% before midday, also caught my attention. Following today’s fall, its market cap is now £12m.

Until last week it offered business-to-business e-commerce services with a focus on Chinese trades, but now its operations have been suspended

It said today that on 19 September it had received an “Administrative Penalty Decision Letter (…) that has imposed penalties of a fine of RMB 18,000 and a one-month suspension of operations for violations of the Advertisement Law of the People’s Republic of China, the Advertisement Management Regulations, and the Prohibition of Pyramid Selling Regulations“.

The warning was issued by the local Administration of Industry and Commerce (AIC) following an investigation after the “AIC received a complaint from the public that certain advertisements on the Company’s B2B website platform violated advertisement regulations“.

It said at the end of August that it will be publishing its interim results for the six months ended 30 June 2015 “on or around Wednesday 23 September 2015.” Watch this space…

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young black colleagues high-fiving each other at work
Investing Articles

Is Legal & General Group one of the FTSE 100’s greatest value shares?

Legal & General shares boast low P/E ratios and massive dividend yields. Could they be one of the London stock…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

I’m looking for the best FTSE 100 value stocks to buy now. Have I found them?

Barclays, NatWest, and Imperial Brands shares are recovering strongly. But these FTSE 100 stocks still trade on rock-bottom earnings multiples.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Where on earth will Nio stock be in 1 year?

Nio stock has demonstrated extraordinary volatility over the past 12 months, but where will it be in a year's time?…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

6.9% dividend yield! 2 cheap stocks to consider for a £1,380 passive income

Looking for a market-beating passive income? These FTSE 100 and FTSE 250 dividend stocks could provide a healthy second income…

Read more »

Mature black couple enjoying shopping together in UK high street
Investing Articles

Potentially 34% undervalued, should I be watching the boohoo share price?

The boohoo share price has seen a rocky few years, but with signs that the economy is improving, could this…

Read more »

Investing Articles

Is the Amazon share price primed for a drop?

The Amazon share price has been on a tear for the last year, but can this trend continue? Gordon Best…

Read more »

Photo of a man going through financial problems
Investing Articles

Down 15% in a week! What’s gone wrong with the National Grid share price?

The National Grid share price isn't supposed to crash but now it has. Harvey Jones is wondering whether to take…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Taylor Wimpey just paid me £158.78. I’m aiming to turn that into a £100k yearly second income

Harvey Jones says small, regular dividend payments can turn a few pounds into a mighty second income, if he gives…

Read more »