Originally Posted by
Beagle
Financials do have a very high Covid beta as they are very sensitive to the economic effects of Covid on their customers and the opposite, to the recovery prospects that vaccines give hope for so its is very surprising to note that while many US, European and Australian financials have rebounded strongly on the hopes of the Pfizer vaccine and yesterday's Modera vaccine with an even higher efficacy at 94.5% HGH has been stuck pretty much in the doldrums.
For many years now I have compared the forward metrics to HGH's peers in Australia and found a very close correlation. Its not often that HGH's forward PE is more or less than 2 different to the average of its peers so imagine my surprise when I noted yesterday that based on HGH's official forecast at the midpoint of $84m = 14.4 cps HGH are currently on a forward FY21 PE of just 9.4 ! 9.8
This compares with peers as follows, (all figures are average analyst forecasts off market screener)
ANZ 13.3 14.5
WBC 13.4 14.8
NAB 15.8 16.6
BEN 14.3 16.5
BOQ 14.4 15.9
CBA 18.2 19.9
Peer Group Average 14.9 16.4
Leaving aside the outlier of this group CBA which for reasons unknown is also trading at about twice NTA this still gives an average forward PE for the Australian banks of 14.25. 15.7
In my experience HGH's normal trading range on a forward PE basis is 11 - 17.5 with the mid point also being 14.25.
I have never seen HGH trade at a discount of this size to its peer group, nothing remotely like it so this presents as a real overlooked recovery story.
I think as 2021 unfolds and the recovery story and vaccinations get rolled out HGH has excellent prospects to recover towards the mid point of its historical PE range which is where the Australian banks already are.
14.25 x officially forecast of 14.4 cps = Target Price of $2.05. I think HGH has excellent prospects to make a strong recovery in 2021. I already have a sizeable position and added some more this morning.
I note the RBNZ dividend restrictions still apply so I am only expecting 5 cps (6.94 cps gross) in fully imputed dividends in the year ahead which gives a gross yield of 6.94 / 137 = 5.1% but I am expecting that to approximately double for FY22 and beyond and on a look through Covid recovery basis HGH could give a 10% Gross Yield in FY22