Wednesday, January 24, 2007

AUB going well but still overpriced

Austbroker holding Limited's (ASX:AUB) strategy of investing in majority stakes in owner-operated insurance brokers has impressed many investors and analysts. Under the group's strategy, it supplies back-office and support functions, while local managers run day-to-day operations. Austbrokers holds equity interests in the 34 insurance broking businesses within the Austbrokers Group. In addition to its core general insurance broking business, the Austbrokers Group cross markets other financial products and services suitable for its client base, including premium funding, life insurance and superannuation and financial planning.

The company's shares have risen significantly from their $2.00 sharemarket listing price and are currently trading at $5.15. Many brokers anticipate Austbrokers stock will continue to perform well. Greg Ward, of Goldman Sachs JBWere, claims the shares are worth $A5.01, based on factors such as the group's business model and low requirements for working capital.

I find it interesting that the stock is trading above the target price of $5.01 yet is is being recommended as a share that will perform well. I have had a look at the chart and there is no way you would want to be involved in this share at this point in time. It has spiked considerably this month and its fundamentals are not undervalued. At best I would say it is priced just about right or slightly overpriced.

Good luck investing.

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