Financial stocks worth watching

Johannesburg - Financial services counters RMB Holdings (RMBH), African Bank (Abil) and the JSE Ltd may offer some opportunities for investors looking to steer clear of larger banking shares.

In a note to clients, stockbrokerage Imara SP Reid said RMBH - which holds stakes in financial services groups FirstRand, Discovery and direct insurer Outsurance - is trading at a discount to its underlying investments. Imara SP Read calculated the value of RMBS underlying investments at 3 180 cents per share.

About the prospects of bourse operator JSE Ltd, the stockbrokerage said earnings will be driven by investor sentiment. The JSE is trading on an undemanding historical price-to-earnings multiple of 11 times. Imara SP Reid called it a "quality emerging market stock", which could make it attractive to foreign investors.

Sasha Naryshkine from asset management firm Vestact told Fin24.com that earnings at the JSE were likely to be driven by the general buoyant mood in the market as well as continued access to capital.

Microlending and banking group Abil had a challenging 2009 as it tried to bed down its troublesome Ellerines acquisition. This discouraged some investors but with more positive economic data coming out in recent weeks, Imara SP Reid issued an "add" recommendation for the stock.

Abil also features in Vestact's core portfolio. However, Naryshkine said the Ellerines acquisition had changed the nature of the business somewhat. "It was a very clean business before the Ellerines transaction, but you must remember that 80% of its business still comes from lending activities."

- Fin24.com