The question around VUK is whether or not it’s a value trap, trading cheap on all key metrics with a PE of 5x and a price to book of just 0.4x. UK economic outcomes have been much better than feared, similar to ours, but VUK has a history of underwhelming, especially when compared to the much loved “Big Four” in Australia. Last quarter showed some good progress on costs, which have been an issue for them, but volumes remain relatively subdued, and margin pressure persists. It’s hard to be too bullish here, but the stock offers clear value in a fairly expensive market. VUK is down -2.6% year-to-date, compared to the UK Banking Index, which is up +3.5%, having popped higher over the last 3-4 weeks, and while our “Gut Feel” is VUK will follow suit, that’s not enough reason to go along.
- We like VUK from a valuation perspective, but the last 12-months have been chasing high-value stocks ever higher instead of looking for a “cheap” name.
- At this stage, we would rather buy VUK above its February $3.15 high and treat it as a trade/aggressive active position.
MM is neutral VUK around $3
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