Even with headwind of mismatched interest rates of assets v...

Even with headwind of mismatched interest rates of assets v liabilities, Commercial is still on an excellent trend. Its Normalised Cash NPAT for FY23 was $42.3m v $35.2m in FY22. Its 1H24 Normalized Cash NPAT was $21.6m v $19.3m pcp. Seems reasonable to think that its full year FY24 result will at least match that of FY23 ie $42m+. Thus HUM’s market cap of $200m is 5 x Commercial’s earnings. Multiples in the sector are very low, but 5x is particularly low for a segment doing so well.

Moreover, that effectively values the Consumer segment at zero. Its FY23 normalised profit was $32.7m v $41.7m. 1H24 was $6.5m v $19.2m It’s true that the Consumer results have been adjusted upwards (ie normalised) to remove big write-offs for suspended products in PosPP but the cards ops are still profitable, albeit worse in last 12 months than previously. It’s crazy to value (in effect) the Consumer business as being worth zero, or less than zero if one puts say a 6 or 7x multiple on Commercial.

It’s hard to guess why the share price is so awful. General negative sentiment, absurd ideas from Morningstar (more later) and concern about ex BNPL/PosPP/suspended products are the most likely reasons. The huge hit to profit in 2023 caused by a big mismatch on interest rates was a shock for shareholders (the Board seemed less bothered), but that should be rolling off fairly quickly. I admit I was very disappointed by the 1H 24 results, but I reckon the market greatly overreacted by whacking HUM from 72c to 41c now. I expect and pray for a turnaround on the August results. Of course if HUM comes out with yet another dreadful result in PosPP/suspended products that would be unforgivable and all bets then off.

Not advice. DYOR