Financials
Paul Hollingworth’s Buy call (July 2021) has yielded a return of ~60% but given fundamental and technical momentum remain positive (PH Score™ 8.0), Paul sees no reason to alter his constructive stance. Investors should focus on medium-term profitability targets driven by positive changes in efficiency metrics which would make current valuations attractive. If the mid-point of the ROE target of 12-16% is met, the current PBV of 0.83x is too low given the Earnings Yield would be 17% (vs. 12.2% currently), while also remembering that Standard Bank Group acquired Liberty for >1x BV last year.
Edition: 143
- 02 September, 2022
Investec (INL SJ) SJ
Financials
Deposit base and Book Value do not reflect medium-term targets - the current PBV of 0.59x is way too low, especially given Standard Life’s recent acquisition of Liberty for >1x BV. The South African Deposit base is (roughly) rated in line with FirstRand which leaves the UK operation (47% of Deposits, 46% of Credit) valued at next to nothing. The current ROE stands at 5%, management aims to hit 11-15% in the UK and 15-18% in South Africa over the next few years (achievable though cost-cutting and greater digitalisation/technology adoption). Even a pre-pandemic ROE of 12% puts the shares on a PER of just 5x. Shares are far too cheap.
Edition: 115
- 23 July, 2021