Colombian Bank, and financial services company. 27% market share.
MC 10.33 B, EV 17.96B
Revenue trending up, net loans up significantly, cash up, long term debt down. Operating cash flow is increasingly negative – usually a good thing for banks. Excellent liquifity with 350% coverage of nonperforming loans.
ROE: 15.8% (81st percentile of banks). Loan to deposit ratio 41%. Liquidity: Net interest margin: capital adequacy ratios:
Growth estimate: 5%
Ratios: P/B 1.02, P/E 7.27
No buybacks, but changing structure of company to allow in future. 8.29% dividend (7.68% FWD)
Management: CEO Dodig holds 13M shares, Chair Stevenson compensation tied to ROE – I like this. No significant insider buys.
Thesis: Colombian re-rate on politic regime change. Safe, non-energy play to diversify portfolio. Do not suspect we see re-rate on the size of Argentina but 2-3x would be possible. Base case is a 20% increase, target $49. Regime change may help overshoot from PE of around 7 to closer to 10, a 40% increase to $57. Colombian currency strength helps as well.
Outside opinion: Morgan Stanley recently updated target to $53 which falls in my range.
Conclusion: 5 unit play. Safe on the risk side, and decent 20-45% return possible. ~8% dividend adds to R/R even without a significant move.