Chesnara PLC (LSE:CSN) offers a "compelling" consolidation opportunity, according to RBC Capital, which reiterated its 'buy' recommendation.
The company specialises in closed books of insurance businesses, which it acquires and manages, creating predictable, long-term cash generation.
"Consolidation of these books is attractive as it creates significant capital and cost synergies, with [Chesnara] well-placed to undertake further transactions," RBC said in a note.
It points out that the company's 10% dividend yield "does not reflect its enhanced cash generation and inorganic growth profile".
Speaking to analysts recently, Chesnara said it has a solid deal pipeline with potential transactions worth up to £500 million.
RBC has tweaked its price target for the stock to 320p from 335p, though this still represents a significant premium to the current price of 251p.