EQS-News: Edison Investment Research Limited / Key word(s): Financing/Banking Syndicate
08-May-2017 / 09:14 GMT/BST
London, UK, 8 May 2017
Edison issues initiation on Banca Sistema (BST)
Banca Sistema's (BST) main activity is financing trade receivables from the Italian public sector. It also purchases commercial receivables and has a growing salary and pension backed loan business. It aspires to be the leading independent speciality finance provider in Italy. A modest valuation, capital headroom, potential for increased penetration of public sector factoring in Italy, market share gains for BST and the development of diversifying businesses combine to make an appealing investment proposition.
Compared with selected peers (page 13) Banca Sistema trades on the lowest P/E and a below average price to book ratio. Applying an ROE/COE model suggests, on our assumptions, that the market is building in a cost of equity of over 15%, which appears cautious. Assuming an ROE of 22% and 12.4% cost of equity we come to a valuation of c EUR3.15, more than 30% above the current share price.
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