Reliance Global Group: Yet Another Promising Acquisition

GuruFocus.com
·4 min read

- By Ishan Majumdar

Reliance Global Group Inc. (NASDAQ:RELI) continues to pave its way forward by leveraging new partnerships and improving its technology to deliver a seamless digital experience for policy buyers.

The company announced it is aquiring J.P. Kush and Associates on Thursday, causing a spike in the share price. The management's acquisition-led growth strategy through adding synergistic insurance agencies to its overall portfolio has helped the company grow in recent years. Reliance's proprietary tech platform, 5MinuteInsure.com, has also been a key catalyst for growth. Overall, the company is proving itself to be an attractive opportunity for microcap investors.


Acquisition of J.P. Kush and Associates

Reliance Global's management continues to acquire attractive insurance agencies at reasonable valuations and pushing them through its tech platform in order to generate revenue. On Thursday, the company announced its acquisition of J.P. Kush and Associates Inc., a premier health care insurance agency, for $1.95 million. This agency operates in 10 states in the U.S., including California, Florida, Ohio and Michigan. The company has a base of over 100 independent agents who will now be added to Reliance's agency network. Reliance's management believes this addition will support the company's future plans to add new insurance products to its 5minuteinsure.com platform, including health insurance policies.

It is also worth highlighting that J.P. Kush generated revenue of more than $1.1 million during the trailing 12-month period with mid-double-digit operating margins, which is why its price of $1.95 million (ia valuation of around 1.8 times) appears to be extremely reasonable. J.P. Kush could become a valuable addition to the company's overall portfolio of agencies as well as bring meaningful operating synergies for Reliance Global. Such acquisitions are bound to help the company leverage its national footprint, gain economies of scale and create shareholder value.

5MinuteInsure.com platform

5MinuteInsure.com is a platform created by the company to leverage its robust technological base, with a goal to tap into the growing number of online shoppers and, in turn, drive demand to its affiliated agents. The platform focuses on utilizing artificial intelligence to provide competitive insurance quotes by taking minimal data inputs from the customer through their smartphones or tablets.

Recently, the company announced that its affiliated Reliance Insurtech division has received licenses to sell home and auto insurance in 43 states, with plans to expand to additional types of insurance, which is a huge step forward. While Reliance Global onboards carriers in these states, management is in the process of upgrading the online platform to offer various insurance products in these states. Management is pursuing an aggressive marketing strategy and has plans to expand its sales initiatives by targeting enterprises with large headcounts to ensure bulk sales of insurance policies, thus beefing up its own financials as well as its agents.

Final thoughts

Reliance Global Group: Yet Another Promising Acquisition
Reliance Global Group: Yet Another Promising Acquisition

As illustrated in the chart above, the acquisition of J.P. Kush and Associates led to a spike in the share price of Reliance Global. It is worth highlighting the fact that over the last three years, the company has grown its revenue by more than 90% on an annualized basis. Despite this phenomenal growth story, the company trades at a price-sales ratio of 1.65, which appears to be significantly low for an insurance tech player.

Reliance Global Group: Yet Another Promising Acquisition
Reliance Global Group: Yet Another Promising Acquisition

Interestingly, even the GF Value Line sees Reliance Global as heavily undervalued to the extent that it warns investors that it is a possible value trap. However, when we analyze the qualitative updates of the company, such as the insurance-tech platform and the series of synergistic acquisitions, we realize that it is one truly undervalued insurance gem.

With increased online shopping as a result of the Covid-19 pandemic, 5MinuteInsure.com could become a highly pertinent platform for consumers to meet their insurance needs. Its geographical expansion could result in huge top-line growth for the company in the coming months. Overall, given the acquisition-focused strategy and the expansion technology platform, Reliance Global is an excellent undervalued insurance-tech play for investors with a high risk appetite looking for promising microcap opportunities.

Disclosure: No positions.

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This article first appeared on GuruFocus.

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