VMIL beats market expectations
BROKERAGE FIRM Victoria Mutual Investments Limited beat market expectations with a sevenfold increase in quarterly profit, leading one of its peers to lift its target price for the stock.
Large brokerage NCB Capital Markets expects the VMIL stock to grow by a third, an analysis it pins on expectations of further growth in corporate financing of small businesses and capital market growth.
“VMIL stands to benefit from the current credit supportive environment that is underpinned by a stable economy,” said NCB Capital Markets in assessing the performance of its peer. “This should result in an increase in the demand for the company’s corporate financing solutions, as businesses take advantage of the opportunity to expand their operations.”
The stock grew by more 110 per cent year-to-date but NCB Capital expects it to hit $11.11 in the near term from its position of over $7.92 at market close on Monday. VMIL currently trades at a trailing price to earnings ratio or PE of 21.34 times earnings, which NCB Capital said was below the financial sector PE of 21.78 times earnings.
“This upside of 37 per cent, plus the dividend yield of 1.4 per cent, provides investors with a potential return of 38.4 per cent,” said NCB, which placed a buy rating on the stock.
VMIL made $135 million in quarterly profit after tax, up 670 per cent in the period ending June. This equated to earnings per share of $0.09 compared with $0.01 a year earlier. Profit over six months nearly tripled from $96.3 million a year earlier to $252.8 million. For the first half of 2019, net revenues hit $827 million, up 43 per cent from $576.2 million the previous year.
The stock has remained largely
static for over 18 months but jumped in the final week of July from roughly $4 to $8, indicating that the market had not forward-priced in the results. The stock traded at $7.90 at midday on Thursday.
All of VMIL’s business lines recorded encouraging growth, resulting in a 14 per cent increase in balance sheet assets, a 15.9 per cent increase in its asset management portfolios, a 251 per cent improvement in fee income from the equity brokerage unit, which the company attributed to increased market share, and a 258 per cent gain in bond trading and capital market financing. VMIL also grew its book value from $2.49 billion to $4 billion over the past year.
Another brokerage house, JMMB, had previously priced the stock at $5 to $6 back in April, with a positive outlook. VMIL was trading then at $4, which led JMMB to recommend the stock as a buy. JMMB has not updated its analysis since then.