Bendigo and Adelaide Bank Limited

BEN Details

Business Update: Bendigo and Adelaide Bank Limited (ASX: BEN) is engaged in the banking business and undertakes several financial services including consumer, residential, business, and rural lending. As per a recent update, the bank has released its presentation for market briefing on its digital transformation phase. Its objective is to create an enhanced value proposition for its clients and provide a customer-centric operating model.

FY21 Performance Update:

• The bank reported robust performance during the year, with Net Interest Income at $1,422.5 million in FY21, compared to $1,333.8 million in FY20.
• Statutory NPAT of the bank stood at $524 million, reflecting an increase of ~172% on the prior year.
• BEN declared a fully franked final dividend of 26.5 cents per share, and thus taking the full year dividend to 50 cents per share.
• Customer growth stood at an impressive 9.6% during the year.

Trend in Net Interest Income (Source: Analysis by Kalkine Group)

Key Risks: The bank faced with the risk of credit losses in view of the prevalent macro-economic issues, which might result in increased NPA’s.

Outlook: The ongoing economic challenges presents both opportunities and risks to the bank’s business. However, it continues to witness decent demand for lending across its consumer, business, and agribusiness clients.  

Valuation Methodology: P/B Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation

The stock of BEN gave a negative return of ~14.08% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $8.430 - $11.680. The stock has been valued using the P/B multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The bank might trade at a slight discount to its peers, considering the impact of COVID-19 on the economy and subsequent impact on risk assets. For valuation, few peers like Bank of Queensland Ltd (ASX: BOQ), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC) have been considered. Considering the decent financial performance, increase in customer base and increased traction in consumer & agribusiness segments, we give a “Buy” recommendation on the stock at the current market price of $8.450, as of 29 November 2021, 10:31 AM (GMT+10), Sydney, Eastern Australia.

BEN Daily Technical Chart, Data Source: REFINITIV

VGI Partners Limited

VGI Details

Portfolio Update: VGI Partners Limited (ASX: VGI) is a global equity manager and manages capital for its clients. Recently, the company has held its portfolio briefing, where it has highlighted its differentiated portfolios of quality companies with decent growth potential. Its ‘VGI Partners Global Investments Limited’ portfolio has delivered a return of 25.6% for the period 12 months to June 2021, and ‘VGI Partners Asian Investments Limited’ has provided returns of 15% for the period 12 months to June 2021.

FUM Update:

The company has reported a decrease in its Funds Under Management (FUM) performance to $2.8 billion as of 30 September 2021, compared to $3.2 billion as of 30 June 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company’s line of business makes it prone to the volatility of movements in equity markets owing to macroeconomic events like the ongoing COVID-19 pandemic.

Outlook: The company's investment policy comprises of absolute return of 10-15% pa, with a view of long-term investments targets. The company has witnessed a decline in its NTA owing to broader market performance and will look for improvement in this metric going forward.

Stock Recommendation

The stock of VGI gave a negative return of ~31.71% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $4.150 - $8.660. On a TTM basis, the stock of VGI is trading at an EV/Sales multiple of 2.7x, lower than the industry median (Investment Banking & Investment Services) of 4.4x, thus seems undervalued. Considering the track record of portfolio returns, expected positive performance from the equity markets, current trading levels & valuation on TTM basis, and the key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $4.170, as of 29 November 2021, at 10:33 AM (GMT+10), Sydney, Eastern Australia.

VGI Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: - 

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest. 

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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