Peer Comparison - Quite interesting
We know the Australian banks are facing quite a potential challenge from RBNZ in terms of their capital ratio, whereas even if RBNZ go to a 15% capital HGH can get there through its DRIP alone over the next 5 years.
If we look at the following three year forward PE comparison which is the average analyst view as presented on Market screener we see that generally speaking and taking the below Australian banks as a representative sample, there is no forecast eps growth for the Australian banks, actually a forecast 1.7% decline (average forward PE FY19 11.7, average forward PE FY21 11.9).
Comparing this with HGH we see the forward PE improving from FY19 of 12.3 to FY21 of 10.7 a 13% earnings improvement forecast over that 2 year period, average 6.5% per year.
Further, by FY21 HGH's PE at 10.7 will be 10% lower (10.7 v 11.9) than the Australian banks despite its quite considerably superior average growth rate.
Interestingly this compares with the FY19 PE being at 12.3 v the sector average of 11.7. I would at least expect that modest PE premium (5%) to be maintained so over the next two years I expect HGH to outperform the average performance of the Australian banks by ~ 15-20%.
The current modest PE premium to the sector average looks a little light to me given the seriousness of the capital adequacy challenge faced by the Australian banks with their operations here. I think HGH is an accumulate for growth and expect the forward yield to be 8.5% gross at the price of $1.55 assuming average forward dividends of 9.5 cps annually over the forecast period.
PE's for FY19, FY20, FY21
NAB 10.8, 10.3, 10.6
WBC 11.9, 11.0, 11.3
ANZ 11.2, 11.0, 11.3
CBA 12.8, 13.2, 13.8
BEN 11.7, 11.8, 12.2
BOQ 11.8, 12.0, 12.4
HGH 12.3, 11.4, 10.7
Full imputation credits are of course only available on HGH.
My rating is now accumulate.
P.S. I see fair value now at $1.62 and my one year price target is $1.73.