Financials

〉 Secure Trust Bank PLC – Equity

»  Mr Market Miscalculates

Secure Trust Bank is way cheap when considering its growth potential, strength of its balance sheet – zero debt- and the low risk appetite philosophy that management operates. After the sale of unsecured Every Day loans portfolio -which did command significant risks but also great profitability-, the bank sits with a large cash pile of ~ £140 m whereas the market demands £400 m for the entire company. So, if I buy the shop for £400m and get a register along with £140m cash, actual market valuation of earnings potential stands at £260 m.  Judgement is out whether going concern value of business is greater than £260 m which I believe it is. A good enterprising bank for a diversified portfolio.

〉 Virgin Money Holdings 7.875% At1 Perpetual – Fixed Income

»  Even the bad times are good

A U.K based retail only bank, Virgin Money Holdings has increased additional tier-1 bond issuances as the recent bonds are trading at 95.53. Not exactly dirt cheap, the coupon seems very attractive, underlying business segments are posting growth and in times of rising interest rates, my belief is that the at1 bonds of “safe issuers” will offer cool returns in the fixed income market. The bond is complex, riddled with regulatory ifs and buts and thats exactly the reason for its attraction where few who really understand (discounting myself out) them end up allocating capital to them efficiently.