Oxbridge Re Holdings (NASDAQ: OXBR, $OXBR) stock may be under the radar, but that’s not necessarily bad news, especially for investors searching for untapped value in well-run companies. Mind you, not untapped potential, but value. That’s a big difference, and OXBR has the latter.
In fact, OXBR’s 49% ownership stake in Oxbridge Capital (NASDAQ: OXAC) alone, currently trading at $10.09 with a market cap of roughly $146.2 million, should be causing a bidding war for OXBR stock closer to the $12.40 level. But even that 270% jump would undervalue the company. Why?
Because in addition to that investment asset, OXBR has about $1 in cash per share, generates revenues from its reinsurance interests, and has a management team with a proven ability to create sustainable shareholder value.
Exceptional Leadership In Place
That team is led by Sanjay “Jay” Madhu. And here is the exciting part about his tenure. Along with finding ways to drive shareholder value higher at OXBR, he is well-connected to HCI Group, Inc. (NYSE: HCI). This fellow low-float reinsurance company saw its valuation surge from an IPO price of $6.00 to its current $67.83 price tag. And considering that Mr. Madhu was one of the first employees at HCI and sits on their board today, it’s a relationship that may present near-term value-creating opportunities.
That’s speculative. But with global logistical challenges pressuring margins in every industry, the best path for growth, no matter company size, may be to combine forces rather than fight them. So, anything and everything should be considered in play. Better yet, if a deal does come OXBR’s way, whether its own or value through OXAC, its current $19.37 million market cap could be a launchpad toward more appropriate and deserved values.
In fact, it likely would be. But know this, too. OXBR isn’t a pure assets play. Beyond successful investing, OXBR is showing it can more than survive turbulent markets; it can thrive. Last quarter was impressive for the times.
Growing Despite Global Slowdown
At the end of Q1, OXBR reported holding $5.1 million in cash, burning just $300,000 during a quarter plagued with massive global market disruptions. Also impressive is that revenues increased with no underwriting losses during the quarter. That’s not all. They have no debt, maintained their low O/S count of roughly 5.78 million shares, and continued to invest in other opportunities taking advantage of opportunities in the blockchain, insuretech, and artificial intelligence sectors.
And while the share price declined during the period, it’s important to note that the decline may be investor, not company-specific. Filings indicate that a significant activist investor sold his stake. Still, while that investor may be gone, just like being under the radar, it isn’t necessarily a bad thing.
Remember, activist investors and companies don’t often share a common vision. Many times, activist investors want to seize opportunities to create near-term value despite potential consequences to long-term sustained value. Was that the case at OXBR? No one really knows except the seller and the company.
However, what may be inferred is that the long-term goals of OXBR likely didn’t align with potential short-term propositions proposed by outside investors. And that’s okay. Those following CEO Jay Madhu know that he can deliver value. Moreover, the thesis behind this investment proposition isn’t only about the OXBR potential but rather what they already have. Thus, it’s the current assets exposing the undervalued share price, plus the potential, making investment consideration in OXBR a timely proposition.
Near-Term Prognosis- Excellent
It gets better. Investors could get maximum impact from a CEO who has a proven ability to capitalize on and maximize opportunities. As mentioned, CEO Jay Madhu was at HCI when they found its path to transforming from a $6 stock to a company valued today at over $67 with a market cap of more than $614 million. Of course, investors only care about good history if it can repeat; Madhu appears to have a great start to making that happen.
Accounting for his investment in OXAC alone should have OXBR stock trading north of $12. That’s based on OXAC’s current $10.09 price. But while that’s a tremendous asset, it’s not the only value driver, and OXBR looks better positioned for organic growth than at any time in its history. Thus, its share price can be misleading.
In fact, while OXBR shares have declined by about 20% since last quarter, its holdings in OXAC have increased, a result of OXAC shares being higher by about 1% during the same period. Therefore, trading lower is a contradiction of events. More to the point, investors may want to pay less attention to bear market volatility and instead consider taking advantage of an exposed pricing disconnect. This one presents an actionable opportunity.
Remember, only reaching the fair value inherent to its OXAC stake is enough justification to send OXBR shares higher by more than 270%, which, even then, would undervalue OXBR shares.
A Bullish 2H/2022 At OXBR Expected
So, to investors taking positions on the heels of an activist investor and considering existing in that wake, don’t leave just yet. The silver lining may be that the CEO Jay Madhu can also be viewed as an activist investor. But in this case, investors may be better off, knowing that his transparent long-term vision likely aligns with their own in hopes of creating sustainable long-term value with assets that can be leveraged for additional growth. Remember, acquisitions added to OXAC accrue 49% to OXBR, and with OXAC a well-funded investment vehicle, that’s likely to happen before year’s end.
Hence, with potential catalysts in sight, OXBR at current levels presents more than an attractive proposition; it’s compelling. Moreover, the investment thesis is solid. Intrinsic assets, inherent potential, an impressive capital structure, and a massive price to assets valuation disconnect exposing 270% near-term upside are evidence that investment consideration is warranted. And to growth stock investors, it may be more than warranted; it may be an opportunity too good to ignore.
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