Admiral: 5% Dividend Yield And Multi-Year Compounding Ahead (Preview)

Company Update (ADM LN) (Buy)

Summary

• Admiral stock has gained 20% since our upgrade in October, but still represents a multi-year compounder and has a 4.9% Dividend Yield.

• The U.K. Motor business grew its policy count by 8.7% in 2020, continuing long-term share gains; new regulations may help further.

• There was growing momentum in other businesses, with International reaching profitability and U.K. Household profits doubling.

• Admiral stock is trading at 18.9x 2020 EPS, and the normalized P/E is around 20x once we exclude the one-off factors in 2020.

• With shares at 3,217p, we expect a total return of 52% (13.9% annualized) by 2024 year-end, in just over 3 years. Buy.

Introduction

We review our investment case on Admiral Group PLC after the stock reached a new all-time high, 8 months after we upgraded our rating to Buy.

Since our upgrade in October 2020, Admiral stock has gained 20% (including dividends, in GBP), ahead of peers Direct Line and Sabre Insurance, though behind the U.K. benchmark FTSE All-Share.

As we will expl…