Investec (INVP) the Anglo South African investment group looks good value in a neglected / misunderstood / contrarian kind of way. So what I hear you say why won’t it stay that way? Good question and it may do for all I know. They do however seem to be trying to do something about it by proposing the de-merger of their Asset Management division which incidentally manages £121bn - bet you didn’t know that. That’s before you factor in the £50bn+ that they manage on the private client / wealth management side of things. Any way to cut a long story short I have been researching the de-merger document and other stuff they have put out on their Investor relations website and I have to say I’m quite taken by it and think it could be quite undervalued, although as I said at the outset I guess it could just remain that way.
Nevertheless as it currently stands it does look pretty good value on around 7.7x earnings with a 5.7% dividend yield which is more than two times covered. The balance sheet also appears to have net cash of around £1.6bn at the interim stage as they have taken in more deposits than the loans they have made. Their lending also seems to be reasonably prudent as the loan losses are pretty low & it is not overly leveraged. They also stand on a price to book value of around 1x with an ROE of 10% or so which seems fair enough for a bank, although they have ambitions to push this up towards mid-teens in the next few years which could argue for a re-rating if they achieve it. So all in all it ticks a lot of value boxes (which I know is a dirty word these days) although it does lack momentum, certainly in price terms, but has had some earnings upgrades more recently.
A look at the sum of the parts is also quite interesting and is I think another potential indicator of some value being on offer here in addition to the above traditional metrics. Firstly there is the Asset Management arm which is being spun off and existing Investec shareholders will end up owning 70% of it given the 10% new stock being issued and the 20% held by employees. In the documents relating to this they…

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