Edison Investment Research Limited
London, UK, 9 April 2021
S&U (SUS): Ready to meet unlocked demand
S&U's results for FY21 were significantly affected by the pandemic, but a near-term bounce back in demand for motor finance is in prospect as dealer showrooms reopen and consumer confidence improves. Underpinning the longer-term outlook for Advantage has been continued work to adapt and improve the business. Aspen Bridging also looks set to contribute to growth with loan-book growth reviving in the second half of FY21 and likely to see further significant growth in the next two years.
The shares trade on a price to book ratio of c 1.5x, a prospective P/E that falls to 10.6x for FY23 and offers a yield of 4%. Using an ROE/COE model, the current share price implies a return on equity (ROE) of 14%, which is above our current 13% estimate for FY23. However, that year will probably not have seen the full effect of the potential recovery and the pre-COVID-19 five-year average ROE was over 16%.
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