Only Australian listed company with significant business in wealth, insurance and banking.
Slightly over 50% of revenue from insurance, significant negative impact on share price due to storms in NSW both this year and last year. Expected financial impact of no more than $200M (net of provisions) already well and truly priced into the current share price. Suncorp is reinsured for events exceeding $200M.
31% of revenue from banking, negative share price impact from the now standard justification of “sub prime fears.” In real world financial terms, Suncorp is looking at a margin hit of $20M or so on their loan books. Not exactly dramatic stuff for a company that netted over $1B last time around. Liquidity concerns across all banks are the proverbial jumping at shadows. Australian banks have no real exposure and those with a decent deposit base actually stand to benefit (by claiming business off the non bank lenders).
About 14% of revenue from wealth, departure of key staff has had a negative impact on the share price. No actual impact on financials as yet, potential for flat fee income due to a slowdown in FUM growth.
In my view, Suncorp is currently priced at a level lower than the worst case scenario.
Key Points:
Core banking position in the booming state of Queensland
Promina acquisition efficiencies not yet reflected in financials
Key general insurance brands including GIO, AAMI, APIA and Shannon’s
Currently trading at a bargain PE of 10 and yielding a dividend of 6.7%
Aspect-Huntley has Suncorp a Buy
My story:
Have held both Suncorp and Promina (until takeover) for a number of years now. Buying more now, consider Suncorp the best value in the banking sector at the moment, even better than my own employer (I’m an internal auditor for a big 4 bank). Suncorp is littered with short-term bad news driving down their price, an ideal buying environment in my view. I don’t care for charts, graphs only show the past, only fundamentals suggest the future. Enjoy your shorts while they last, try not to lose them when the market turns.
SUN Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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