One Savings Bank plc (OSB) is a UK-based lending and retail savings company. The Company operates through three segments: Buy-to-Let/SME, Residential Mortgages and Personal Loans. The Company provides Buy-to-Let mortgages secured on residential property held for investment purposes
by experienced and professional landlords and commercial mortgages secured on commercial and semi-commercial properties held for investment purposes or for owner occupation. It also provides residential development finance to small and medium sized developers and secured funding lines to other lenders. The Company lends to owner-occupiers with a geographical bias towards London and the South East. OSB also offers bespoke residential first charge, second charge and shared ownership mortgages through specialist brokers. It also provides secured funding lines to other lenders. The Company also offers unsecured lending services.
On November 2nd 2016, OSB issued a trading update. Citing a strong financial and operational performance, OSB said trading had continued in line with management expectations. The underlying loan book grew by 13% for the nine months to Sept 2016, while net loans & advances grew by £466m to £5.6bn during the period. CEO Andy Golding said he was “extremely pleased with the performance of the business this year.” “Application levels for the second half to date are significantly in excess of the first half and our pipeline of new business is at a record level. This means we remain confident of achieving our net loan book growth target for this year and double-digit growth into 2017.”
Although VectorVest had identified the potential at OSB, some time ago, the opportunity came firmly into focus after the Brexit vote saw the shares fall to 173p, the lowest level since August 2014. OSB scores exceptionally well across key VectorVest metrics, including Value, Relative Value (RV), Relative Timing (RT), Earnings Growth Rate (GRT) and Growth to P/E Ratio (GPE). Overall VectorVest scores a current Value of 424.49p per share. At the current 327.50p, the stock can be considered as undervalued.
The chart of OSB is shown above with the key Earnings per Share (EPS) metric shown as the blue in the window below the price. EPS is growing strongly. The share has made several rising bottoms in price over the last three months and also has broken a down sloping trend line. Technicians will notice that the trendline is also the “neckline” of an inverted head and shoulders reversal, where the selloff after Brexit is the head of the pattern. The target from the head and shoulders reversal pattern using time honored charting methods is around 460. This is very close to the VectorVest valuation.
VectorVest considers OSB to be a key financial sector play, with all the hallmarks of a quality growth stock. In light of the recent trading update, at the current 327.50p, we believe OSB presents a significant investment opportunity.
November 17th 2016
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