M&F is new investor darling

Johannesburg - Investors are more interested in potential corporate action at short-term insurance group Mutual & Federal (M&F) than an upbeat trading update of rival Santam.

Since July, shares in M&F have risen 19% from 1 505c to 1 805c.

M&F is a tightly-held subsidiary of the Old Mutual group. It fell out of favour with investors last year when its parent company aborted an announced attempt to sell the company. Old Mutual holds about 74% of M&F stock.

Following a tough 2008, M&F's performance held out well in difficult conditions with a 7% decline in gross premium revenue and a R118m operating profit for the six months to end-June 2009.

A local analyst who declined to be named said he believed corporate action could be on the cards in the form of either an offer to minorities from Old Mutual, or the revisiting of a proposed deal with Royal Bafokeng Holdings (RBH).

RBH pulled out of buyout talks early 2008, as the outlook for financial services darkened and the two parties could not agree on a price.

Last week, Santam informed the market that its earning per share was expected to be between 215% and 225% higher than in the previous year. The performance was attributed to a strong improvement in the group's investment activities, although on the back of a very weak 2008.

Stockbrokerage Barnard Jacobs Mellet advised clients that it preferred M&F over Santam because of potential corporate action at the group, and retained an "overweight" recommendation on the stock.

According to unit trust data at the end of June, only one out of 19 local asset managers had sold shares in M&F with nine adding to their positions.

By midday on Tuesday, M&F's shares were up 1% (18c) to 1 793c.

- Fin24.com