Avior Capital Markets - Investec Limited (101G) Investec | Value hidden by short-term costs

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Avior Capital Markets

Harry Botha

Investec | Value hidden by short-term costs

Investec's H1 '20 (to Sep '19) pre-close guidance was disappointing but reflected challenging conditions for earnings growth. Despite adjustments for restructuring items, management expects lower adjusted EPS y/y in H1 '20 (-4% to -7%) due to muted investment banking and trading revenues in the UK bank. However, the pre-close guidance showed positive trends in annuity revenue streams. UK advances growth (11.5% y/y) and Asset Management net flows (GBP3.3bn in five months) were ahead of our expectations. Management also expects operating costs to decline y/y which is encouraging. We expect the highest declines in operating costs in the centre and the UK bank. Despite the disappointing half, we believe the Group's prospects for improved profitability in FY '21f and â€˜22f remain intact. Please find our analysis and updated forecasts in this report.

25/09/2019 15 EN

Underlying

Investec Limited

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ZAE000081949 Johannesburg Stock Exchange South Africa

Provider

Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.

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Analysts

Harry Botha

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Investec | Value hidden by short-term costs

Investec | Seeing opportunity

Investec | Banking on progress

Tiger Brands | ESG | Pressed to execute

SA Investment Strategy | Review of January 2020 for SA investors: Coronavirus weighs on the ZAR

SA Banks | Low credit risk in commercial property | Time to buy SA banks

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