VIRGIN MONEY (VM.) 265.3P
IF YOU’RE LOOKING for value in the banking sector then Virgin Money definitely fits the bill. It is trading on a mere 6.3 times forecast earnings for 2018 despite a very attractive earning profile. As a comparison, Lloyds
(LLOY) trades on 9.9 times next year’s forecast earnings.
It is also cheap on other valuation metrics. For example, the shares are trading on 0.8 times to forecast tangible net asset value for 2018, according to
Virgin Money serves the retail market predominantly with residential mortgages, savings and credit cards. It plans to launch a digital banking service with more details to be announced in November.
Group pre-tax profit is forecast to consistently grow, advancing from £138m in 2015 to £341m by 2019 which adds up to a 147% gain.
Investec analyst Ian Gordon says the market is worried about a slowdown in UK mortgage lending, yet data shows continual growth. He is very bullish on Virgin Money as an investment with a 390p, 12-month price target – implying nearly a 50% potential gain if you buy today.
It is also worth noting market concerns about rising consumer indebtedness and fears about people not being able to keep up on credit repayments if the UK economy deteriorated. Virgin Money says its customer indebtedness is low and reducing.
‘We have no concerns about the quality of our credit card book,’ said chief executive JayneAnne Gadhia at the bank’s half year results in July. (DC) 300 290 280