Syncora Holdings Ltd (OTCMKTS: SYCRF) excellent market run, over the past three years, is showing no signs of slowing down. The stock has continued to power up the charts, with pullbacks emerging as support levels, from where bulls have continued to push the stock higher. However, the stock finds itself in a critical position.
Share Price Analysis
In the first quarter of the year, the stock rallied by more than 20%, keeping up with the uptrend that began in 2016. The rally came at the backdrop of a long period of consolidation that saw the stock come under pressure.
However, the stock did bounce back after the company confirmed the purchase of its Series B Preferred Securities as part of its continued strategic efforts of creating shareholder value. In the recent past, the company has confirmed plans to divest part of its business as it looks to build a lean and more effective business.
The release of mixed financial results for FY2018 is the latest catalyst that could influence the stock’s direction of trade. It awaits to be seen how investors will react to the mixed financial results.
In the meantime, the stock continues to trade in a steep uptrend after a solid start to the year. A 20% plus spike in share price attests to renewed investor interest in the stock. The stock is currently flirting with a key resistance level at the $5 a share level.
A rally followed by a close above the critical resistance level should reaffirm the emerging uptrend, setting the stage for the stock to continue climbing the ladder. Conversely, failure to breach the resistance level would leave the stock susceptible to a drop probably back to the $4.50 support level.
A violation of the support level could give short sellers a reason to come back and continue pushing the stock lower, in continuation of the emerging downtrend.
About Syncora Holdings
Syncora Holdings casts itself as a holding company focused on providing financial guarantee insurance and reinsurance among other insurance products. The company is also engaged in the business of guaranteeing U.S municipal bonds as well as asset-backed securities and debt backed utilities.
Mixed Financial Results
The posting of mixed financial results for the full year ended December 31, 2018, could take a toll on Syncora Holdings bullish sentiments in the market. The company’s total net premiums dropped 47% to $26.7 million from $51.1 million reported a year earlier. Syncora Holdings attributes the drop to lower earned premiums from the continued run-off of the company’s book of business.
Net investment income also took a hit, dropping to $41.8 million, compared to $45.3 million generated in 2017. The drop was as a result lower invested assets. Net loss on insurance cash flow certificates dropped to $15.6 million compared to $120.1 million accrued in 2017.
Syncora Holdings total assets depreciated $642.6 million to $1.04 billion compared to $1.7 billion as of December 31, 2017.
The mixed financial results are the last thing that investors expected given that the stock has been on an excellent run supported by improving business fundamentals.
Early in the year, Syncora Holdings confirmed the acquisition of Pass-through Trust Preferred Securities worth $76.4 million issued by the Twin Reefs Pass-Through Trust. The company paid $64.9 million for the securities, which corresponds, to 764 Series B preferred shares.
“We are pleased to have been able to enter into an agreement to purchase these Twin Reefs securities at a discount as part of our continued efforts to create value for our shareholders and to simplify our capital structure,” commented Frederick B. Hat, the President and Chief Executive Officer of Syncora.
In the recent past, the company has confirmed plans to commence a formal review process focusing on evaluating strategic alternatives for the company. Some of the alternatives the company is exploring include sale of part or all of the company or the New York Financial guarantee insurance subsidiary.
Syncora Holdings finds itself in a precarious position whereby it could break out and register new higher-highs or crumble on investors questioning its long-term prospects. Mixed financial results could dent the stocks sentiments a big blow and consequently trigger a correction from current highs.
A cautious approach is essential in this case as the stock is flirting with a critical resistance level. It would be important to wait and see if the bullish momentum has what it takes to continue pushing the stock higher.
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Disclosure: We have no position in SYCRF and have not been compensated for this article.