Today I am looking at three of the movers and shakers in Tuesday business.
OneSavings Bank
One of the leaders across the London bourses today, OneSavings Bank (LSE: OSB) was recently dealing 10.6% higher on the back of a bubbly full-year results release. The company announced that underlying pre-tax profit more than doubled in 2014 to £69.7m, driven by a 29% bump in loans and advances to £3.9bn.
With extensive cost-cutting initiatives also pulling up trees — OneSavings Bank’s cost to income ratio fell 10 percentage points to 28% last year — the company’s fully-loaded CET1 capital ratio leapt to a healthy 11.4% from 8.4% in the prior 12-month period, it announced.
And despite today’s tick higher, in my opinion OneSavings Bank still offers terrific value for money as revenues look set to keep ratcheting higher. Indeed, the City expects the firm to record earnings growth to the tune of 6% and 10% in 2015 and 2016 correspondingly, resulting in ultra-cheap P/E multiples of 8.3 times and 7.5 times — any reading below 10 times is widely regarded too cheap to miss.
Given these perky growth prospects, OneSavings Bank is anticipated to keep the hammer down on its dividend policy, and the payment is expected to surge to 6.5p this year from 3.9p in 2014, producing a yield of 3%. And the dividend is predicted to advance to 7.1p in 2016, pushing the yield to a chunky 3.3%.
Premier Oil
Shares in fossil fuel explorer Premier Oil (LSE: PMO) have bucked the persistent weakness seen since the summer and were recently trading 15.9% higher on the day. The company has vaulted higher amid expectations that Chancellor George Osborne will unveil a raft of tax cuts for embattled North Sea explorers as part of tomorrow’s Budget.
Of course such moves are welcome relief to the local oil industry, which has had to introduce massive job cuts and reductions in capital expenditure in a bid to ride out current black gold price weakness and build a capital buffer. But such moves are not likely to prove a game-changer should the Brent price resume its downward trend once again — the benchmark slid below $54 per barrel again today as fears over the extent of reduced US production reared their head again.
City analysts expect Premier Oil to bounce from losses of 40.3 US cents per share to earnings of 5.9p per share in 2015, and an 81% advance to 10.6p is pencilled in for the following year. These expectations are driven by expectations of maiden oil at its Solan asset in the North Sea as well as flowing production as its assets in Vietnam and Indonesia.
But should the oil price remain in the doldrums, and/or production at its key assets disappoint, then these projections could collapse hard. Considering that Premier Oil trades on a P/E multiple of 17.6 times for this year I believe that prices do not take into account the difficulties the firm still faces.
Antofagasta
Like Premier Oil, copper giant Antofagasta (LSE: ANTO) remains at the mercy of insipid demand caused by a slowing global economy, as well as floods of new supply hitting the market. Shares were recently 2.1% lower in Tuesday trade and have conceded almost a fifth during the past 12 months.
The Chilean firm announced today that pre-tax profit slumped almost a quarter during 2014, to $1.6bn, as revenues slumped 11.4% to $5.3bn. With Investec commenting just today that Chinese red metal output rose 15.8% in the first two months of 2015, to 1.2 million tonnes, the stage looks set for copper prices to continue dragging.
Despite this backcloth, however, City analysts expect the mining giant to record earnings growth of 34% both this year and next. But I view expectations of such strong growth as hugely unrealistic given the extent of the market’s supply/demand imbalance.
Given these woes, I also believe that Antofagasta’s share price still fails to factor in these risks — the business boasts P/E multiples of 16.3 times and 12.9 times for these years, far above the benchmark of 10 which I would consider a fairer reflection of the battles ahead.