Is Old Mutual Cheap?
24 January 2020 By PDSNETth June 2019, the company reported adjusted headline earnings per share (HEPS) up 10%. It is a well-diversified, well established company in the financial services industry with a high-quality management team and a solid balance sheet.
But its shares have been taking a hammering – mostly because of the messy business of getting rid of its previous CEO, Peter Moyo. The Appeal court has finally ruled that OMU’s decision to terminate Moyo 8 months ago was legal – and this clears the way for OMU to appoint a new CEO. The interim CEO, Iain Williamson has been doing a great job and clearly has confidence in the future of the company since he bought R2m worth of OMU shares on 19th January 2020.
It is very unusual to see a blue-chip share like OMU trading on a dividend yield (DY) of above 5%. In addition, OMU is currently for sale at 1812c a share – and that puts it on a earnings multiple of 5,73. Other large listed financial services companies like Liberty or Discovery are trading at multiple of between 10 and 15 – and they are seen as being relatively cheap in the current environment.
Clearly, the protracted and unsavoury battle with Moyo has brought the share down to levels at which it now appears to be a bargain. Consider the chart:
