RenaissanceRe Holdings Ltd.

RNR Details

RenaissanceRe Holdings Ltd. (NYSE: RNR) is a global insurance and reinsurance solutions and services provider. Its product portfolio consists of property, casualty, specialty reinsurance, and other insurance products distributed through its subsidiaries. Its operating segments are 1) Property, comprising catastrophe and other property reinsurance and insurance written on behalf of its operating subsidiaries, and 2) Casualty and Specialty reinsurance and insurance written on behalf of its operating subsidiaries, joint ventures, and managed funds. As of September 09, 2021, the company's market capitalization stood at USD 7.24 billion.

Quarterly Dividend and Share Repurchase Program: On July 28, 2021, the company declared a quarterly dividend of USD 0.36 per common share, payable on September 30, 2021, to shareholders of record on September 15, 2021. In addition, the RNR board approved a renewed repurchase program to buy back common shares worth up to USD 500.0 million, including remaining balances under previous authorizations.

Redemption of Preference Shares: On July 12, 2021, RNR announced the mandatory redemption of 11 million of its outstanding 5.375% Series E Preference Shares on August 11, 2021, at a redemption price of USD 25.00 per share, along with accrued and outstanding dividends up to August 10, 2021. Redemption of Series E Preference Shares will be funded from the proceeds of the previously announced USD 500 million depository shares offering (each depository share represents 1/1000th stake in a 4.20% Series G Preference Shares).

Q2FY21 Results: The company reported a YoY decline of 4.60% in total revenues to USD 1.48 billion in Q2FY21 (ended June 30, 2021) compared to USD 1.55 billion in Q2FY20. Net premiums earned, which accounted for 80.74% of the total revenue in Q2FY21, improved 18.09% YoY. Net income attributable to shareholders for Q2FY21 reduced to USD 456.82 million from USD 575.85 million in Q2FY20. The combined ratio (i.e., the sum of net claims and claim expense ratio and the expense ratio) for Q2FY21 was 72.3%, compared to 78.5% for Q2FY20. During H1FY21, RNR repurchased 3,019,603 common shares at an average price of USD 159.18 per share, for a total consideration of USD 480.7 million.

Key Risks: RNR generates most of its revenue from a limited number of insurance and reinsurance brokers. As a result, the loss of brokers through mergers or other consolidation could hurt its financials. In addition, the company operates in a highly competitive reinsurance industry and faces direct competition from more prominent players with higher financial and operational resources at their disposal. Historically, aggressive competition has pulled market prices for many of its products. Should this trend continue, it could harm the financials of the company.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

RNR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: RNR share price fell 4.09% in the past month and is currently at the lower-band of the 52-week range of USD 142.61 to USD 185.05. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 38.42. We have valued the stock using the Price/Book Value multiple-based relative valuation methodology and arrived at a target price of USD 166.14. Considering the slight correction in the stock price, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 150.45, down 2.15% as of September 09, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Tower Semiconductor Ltd.

TSEM Details

Tower Semiconductor Ltd. (NASDAQ: TSEM) is a prominent analog semiconductor foundry specializing in providing technology and production platforms for Integrated Circuits (ICs) in the consumer, industrial, automotive, mobile, infrastructure, and other allied markets. The company's ICs are used in various applications, including consumer electronics, computers, communications, automotive, industrial, aerospace, and medical device products. As of September 09, 2021, its market capitalization stood at USD 3.09 billion.

New Collaborations to Enhance Capabilities: TSEM and Quintessent, a leader in laser integration with silicon photonic integrated circuits, announced a partnership agreement on September 02, 2021, to develop the world's first Silicon Photonics (SiPho) process with integrated quantum dot lasers, addressing optical connectivity in Artificial Intelligence and disaggregated computing markets.

Furthermore, on August 25, 2021, TSEM announced a collaboration with Novosense, a leading Chinese supplier of automotive semiconductor solutions, to create a hall sensor for the automotive industry using TSEM's best-in-class 180nm analog architecture. This new hall sensor will be integrated into an On-Board Charging (OBC) unit in plug-in hybrid and battery-operated electric cars.

Releasing New Silicon-Validated Reference Flow: On August 16, 2021, the company and Cadence Design Systems, Inc., leader in electronic design, launched a silicon-validated SP4T RF SOI switch reference flow, which uses Cadence's Virtuoso Design Platform and TSEM's RF Solution. The flow offers quicker routes for advanced 5G wireless design closures, automotive IC product development, and wireline infrastructure.

H1FY21 Results: The company reported a 16.24% increase in revenues to USD 709.35 million during H1FY21 (ended June 30, 2021) compared to USD 610.26 million during H1FY20. As a result, its net income increased to USD 61.83 million during H1FY21 vs. USD 37.51 million during H1FY20. As of June 30, 2021, the company's cash and cash equivalents (including short-term deposits and marketable securities) amounted to USD 728.96 million, and the total debt was USD 338.56 million.

Key Risks: During FY20, TSEM's key customer, NTCJ (previously PSCS), accounted for 25% of its total revenue. Such excessive reliance on a single customer for revenue could harm the company's financial health in the long run. In addition, TSEM sometimes produces wafers in excess of the customer orders in anticipation of higher future demand. If it produces more wafers than the customers actually order, it may be left with surplus inventory, eventually becoming outdated, resulting in a drop in revenues and cash flows.

Outlook: In its Q2FY21 results, TSEM stated that it expects its revenue for Q3FY21 to be around USD 385 million (+/- 5%), representing a YoY 38% organic growth and 24% total growth.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TSEM Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: TSEM's share price surged 60.04% in the past twelve months and is currently trading at the higher band of the 52-week range of USD 17.61 to USD 34.45. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 54.85. We have valued the stock using the Price/Earnings multiple-based relative valuation methodology and arrived at a target price of USD 31.61. Considering the company's growth prospects, new partnerships, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 29.08, up 1.50% as of September 09, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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