Until the F2017 results, NSF was, to a certain degree, a ‘jam tomorrow’ story, with infrastructure investment holding back returns. This is significantly complete and, with its market-leading franchises and payback from historical investments starting to come through, its target 20% EBIT ROA and minimum 20% loan book growth should start to be achieved in 2018 for Loans at Home, and in 2019/20 for the other divisions. Rolling forward the valuation base year has a big effect due to the strong forecast profit growth (2019E P/E ca.10x vs. ca.17x 2018E). The average of our absolute measures (see assumptions in valuation section) is now 101p.
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