Unveiling a Hidden Gem: OSB Group, a FTSE 250 Revelation
OSB Group, a specialist mortgage lender, has caught my eye as a potential new top pick in the FTSE 250. This medium-sized company, boasting a market cap of £1.47bn, operates through savings franchises Kent Reliance and Charter Savings Bank, catering to unique sectors of the mortgage market like buy-to-let, self-employed individuals, adverse credit holders, and commercial clients. Despite flying under the radar, OSB’s shares have surged by 20% in the past year but witnessed a 20% drop in the recent month.
Exploring the Temptation of OSB Group:
- Unveiling a Mixed Bag: While I am intrigued by bargain opportunities amid market turbulence, my past encounters with volatile shares urge me to proceed cautiously.
- Digging into the Numbers: OSB’s recent half-year financial results, though met with a setback triggering the share collapse, exhibited promising figures. Underlying profit before tax doubled to £249.9m, with statutory profit tripling to £241.3m. However, a more in-depth analysis unveils some underlying challenges.
-
Evaluating the Metrics: Despite a surge in underlying return on equity to 18%, OSB encountered a modest 1.5% growth in net loan book, emphasizing a focus on returns over growth as per CEO Andy Golding’s guidance.
-
Glancing at the Prospects: Concerns loom over the buy-to-let market’s future, a segment where OSB thrives, amid uncertainties surrounding Labour’s Renters’ Rights bill and escalated competition in the mortgage market. Nonetheless, OSB’s sturdy balance sheet, highlighted by a common equity tier 1 capital ratio of 16.2%, offers a ray of hope.
-
The Tempting Proposition: At a compelling low valuation of just 5.13 times earnings and an attractive trailing yield of 8.29%, OSB stands out as a lucrative investment avenue. Despite the risks looming on the horizon, including the potential impact of interest rate cuts on margins, the company’s projected net loan book growth provides a compelling case for consideration.
Navigating Forward:
As OSB Group presents itself as a lucrative proposition with its low valuation, robust yield, and promising growth forecasts, the allure of this hidden gem appears too compelling to ignore. While challenges and uncertainties persist, the potential rewards seem too enticing to overlook.
