Watching out for Europe
INVESTEC HAS BEEN an excellent investment over the last year. Investec Plc bounced off a 12-month low of R40.91 back in May 2012 and has subsequently ridden the bull-market higher and is now f lirting around the R70/share mark.
At the moment the counter trades on an earnings multiple of around 14 times with a dividend yield of 4.4%, and according to analyst consensus forecasts on FT.com, the share is still regarded as a “Buy”. The median price target forecast from the analysts sees a 7.8% CLOVER INDUSTRIES return for the full-year, but the consensus forecast is for a decrease in the annual dividend.
If 4% of the return is coming from a dividend and that dividend is expected to decrease, one has to be cautious about the near-term prospects of the group. Throw in concern around the EU banks and concerns about the rand sell-off being overdone and one must believe that Investec is due for a pull-back.
It can’t be valued like an EU bank, but expect it to be broadly re-rated with the sector.