Berenberg: S&U’s ‘strong start’ balanced by macro concerns
Credit provider S&U (SUS) is weather the early stages of an economic downturn, says Berenberg, commenting on last week’s interim results.
Analyst Alexander Bowers maintained his ‘hold’ recommendation and £21.80 price target on the stock, which rose 4% to close at £20.90 on Monday, continuing a positive trend since the update.
‘The results were ahead of our forecasts for the half-year on both revenue and earnings per share. Despite uncertain economic conditions, S&U has continued to deliver a solid set of results for both its motor finance and property bridging finance businesses,’ he said.
Bowers has revised revenue and earnings expectations upwards given the ‘strong start to the year’, although the worsening backdrop is still a worry.
‘Considering the current macroeconomic environment, our revised forecasts for outer years reflect higher loan loss provisions, operating expenses, and financing costs, as well as a larger loan book as S&U deploys the additional funding facilities that are now available to it,’ he said.
On the valuation, the target price is based on 1.2x estimated 2023 book value, with the stock currently trading at 1.1x.