Its shareholders might have to wait some time now before receiving a brand new offer for the holdings — but that was a risk I already highlighted on 7 August when I wondered whether it was too early for a change of ownership at the British insurer.

Inevitably, its stock was hammered today, falling more than 20% in early trade. 

No Deal 

Zurich has confirmed that the “due diligence findings were in line with their expectations” and, while an offer had not emerged, Zurich “had not found anything that would have prevented them from proceeding with the transaction on the terms announced on 25 August“.

Back then, RSA announced that it had received “a revised proposal from Zurich regarding a possible all cash offer for the Company at 550 pence per ordinary RSA share“.

RSA now trades at 400p a share, and I am confident that its management team will continue to deliver on its promises. Moreover, its stock does not seem incredibly expensive at 1.1x book value.

That said, earnings multiples do not point to ‘bargain territory’, while forward core operating margins and cash flows may end up disappointing the bulls — all of which suggests to me that there might be better alternatives than the general insurance sector in this market. My advice is to keep RSA on your radar while paying attention to any news associated to new capital requirements across the industry. 

Finally, RSA also noted today that since Zurich’s unsolicited interest on 28 July, it had made good progress in the delivery of its restructuring plan — indeed, it agreed to sell its Latin American division to Grupo Sura for about £400m earlier this month, in a deal that will strengthen its capital position. 

Down Down Down

Elsewhere, such a tiny company such as JQW (LSE: JQW), whose stock had plunged by 41% before midday, also caught my attention. Following today’s fall, its market cap is now £12m.

Until last week it offered business-to-business e-commerce services with a focus on Chinese trades, but now its operations have been suspended. 

It said today that on 19 September it had received an “Administrative Penalty Decision Letter (…) that has imposed penalties of a fine of RMB 18,000 and a one-month suspension of operations for violations of the Advertisement Law of the People’s Republic of China, the Advertisement Management Regulations, and the Prohibition of Pyramid Selling Regulations“.

The warning was issued by the local Administration of Industry and Commerce (AIC) following an investigation after the “AIC received a complaint from the public that certain advertisements on the Company’s B2B website platform violated advertisement regulations“.

It said at the end of August that it will be publishing its interim results for the six months ended 30 June 2015 “on or around Wednesday 23 September 2015.” Watch this space…

The post Why Shares In RSA Insurance Group plc & JQW PLC Are Being Decimated Today appeared first on The Twelfth Magpie.

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Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

But while the market has turned its back on JQW, the company’s business seems to have only improved.

During February, JQW released a trading update reporting that revenues for the period were “ahead of market expectations“. Unaudited management accounts showed revenues reaching approximately RMB 784 million (RMB stands for renminbi,  the official currency of the People’s Republic of China) at the end of June, up 60% year-on-year.

Moreover, according to the figures supplied by the company, JQW had around RMB 425 million in cash, roughly £45m at the end of June last year.

This indicates that, at present levels, JQW is trading for less than the value of cash on its balance sheet. Furthermore, figures from City analysts suggest that the company is trading at a historic P/E of only 2.8.

These figures make JQW look to be one of the cheapest companies in London. However, while JQW’s figures do seem to stack up, there’s an elephant in the room…

Trust issues 

Certain Chinese companies have gained a reputation over the past few decades for falsifying accounts, misleading investors and poor corporate government controls.

And you don’t have to look far to find evidence that supports this claim. 

Last year, Germany-listed Chinese shoemaker Ultrasonic reported that its CEO and COO had disappeared, taking with them all of the company’s cash. A few months earlier, shares of menswear maker Fujian Nuoqi fell by 30% for no apparent reason. It later emerged that the company’s chairman had disappeared.

Another Chinese group, Hydoo International Holding, also lost its chairman and failed to find him again, while Youbisheng Green Paper was forced into liquidation after its CEO went absent. All of these cases happened within the space of a few months. 

There’s no indication that JQW will disappoint investors in the same way. Nevertheless, based on past events, it’s easy to see why the market remains cautious about the company’s outlook. It seems to be that JQW’s valuation may be likely to remain depressed until such time as trust in Chinese corporate governance has been rebuilt. 

The bottom line

All in all, JQW is growing rapidly, has a cash-rich balance sheet and is currently one of the cheapest companies trading in London. Unfortunately, JQW is being tarred with the same brush as some of its peers.

However, if JQW proves that it can be trusted, there’s no reason why it can’t return to 40p. As the father of value investing, Benjamin Graham, said: “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

The post Can JQW PLC Return To 40p… Or Is It Heading For The Rocks? appeared first on The Twelfth Magpie.

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• Up 446% in 12 months! What’s next for the Ceres Power share price?
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• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.