In spite of all the ups and downs in recent months, what’s left of Quindell (LSE:QPP) after the divestment of its core Professional Services Division (PSD) to Slater and Gordon could still represent good value for money.
Value
Frankly, I don’t know if that’s the case. In fact, many elements suggest that you might be wrong — but just how wrong could you be betting on a stock that, at 128p a share, is a punt on the unknown at present time?
Quindell’s new business is being valued at zero pence a share right now, simply because its current equity value equates to the amount of cash that the company plans to return to its shareholders.
So it’s never been easier to invest in Quindell over the last 12 to 18 months, I’d argue — but it comes with caveats.
What’s Left Of Quindell
Its new management team, first: is there one in place now that should be trusted after months of tiptoeing around the truth?
When it announced the completion the sale of PSD on May 29, Quindell also announced the new team, made up of a few non-executive directors that joined the board currently led by Richard Rose, who is non-executive chairman. It appears to be a decent mix and blend of expertise across several fields, with appealing political connections.
If Quindell finds the right man to lead the show — it’s actively seeking a new chief executive — then it could be just the right time to bet on what’s left of its portfolio, namely: a) connected car and telematics; b) insurance claims management systems; and c) insurance brokerage, which has a technology and telematics slant.
The New Quindell
We don’t have any element — nothing — to value the new Quindell, but let’s have a best guess to determine what it takes to believe in it.
As an asset-light business, the new Quindell must generate hefty margins and a steep growth rate to justify a lofty valuation on the stock exchange. So, assuming that it can turn over £200m in year 1 and £600m in year 2, for adjusted operating cash flow of £60m and £180m, its enterprise value could easily be worth between £1.2bn and £3.6bn, for an implied share price of between 270p and 810p a share, assuming no debts and a constant number of shares outstanding (444m).
That’s the kind of performance you should expect if you have been invested since the old Quindell hit its record high in the spring of 2014.
