Growth Focus: Auswide Bank Ltd (ABA)

by Patrick Taylor

Date of Data Capture: 29/3/2018




Classification: Commercial Bank


Current Price: $5.45


Market Capitalisation: $227M


Forecast EBITDA Growth: 16.13%


Yield Estimate: 6.20%


Consensus Price Target: $5.88


# Covering Analysts: 2


Discount at Current Price: 7.89%


Price Target Trend: Increasing-Flat


Signal Timeframe: Quarterly-Weekly-Daily


Trend Bias: Flat-Down / Long-Medium

Short-term: Positive
Medium-term: Positive-Neutral
Long-term: Positive-Neutral

Recommendation: Buy


Focus: (Dividend Income &) Capital Growth


Set up Notes:

·    Everyone wants to buy cheap stocks but no one likes what ‘cheap’ looks like… Here we are looking to pick up ABA as it works off a strong support base above $5.00 backed by good performance and an exciting technical set up.

·    Auswide has been steadily growing sales over the last few years, increasing earnings over 26% last year with a strong 2018 expected and good fundamental performance forecast out to 2020.

·    Technically ABA is still working out of a major downtrend with price compressing under falling dynamic resistance, while making good progress with multiple positive signals here.

·    Support is strong here at $5.00 with resistance targets at $5.50, $6.00, $7.00 and $10.00 above.

Growth Focus: Auswide Bank Ltd (ABA)

Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.

Being able to follow a proven system is of paramount importance when trying to achieve consistently good investment results… this is true even (or maybe especially) when the results go against your own personal bias. We have that here with Auswide Bank Ltd (ABA) and small consumer lender based in Queensland as their strong performance, forecasts and technical outlook practically beckons investors to take a chance on them.

Beginning life in Queensland as the Wide Bay Capricorn Building Society in 1979, it listed onto the ASX in 1994 and expanded via organic and acquisitive growth to become Auswide Bank by 2015. With a growing presence across Central and Northern Queensland the company provides home loans, personal and business banking to customers across Australia. With assets now exceeding $3 billion, combined with improving credit ratings, low and decreasing arrears rates, they look ready to move on with their greater recovery.

Future growth should remain true to form with expectations for further strong organic growth and a continuance of their active acquisition strategy. Performance has been consistently strong over the last few years with improving sales, margins and income driving earnings gains by 26% in 2017 and forecast to jump a further 16% in 2018. Positive expectations continue through to 2020 and support a strong dividend yield estimated around 6.20%, a significant benefit that should have growth investors saying gimme, gimme, gimme.

Pricing history shows two distinct trading periods for the stock with strong gains being made from lows of $2 in 1994 up to $13 by 2007. The fallout from the GFC saw them back at $5 before rallying again to reach $11 by 2011 before beginning a long-term pullback to $5 support from 2013 to today. The trend looks ready to shift again here with positive momentum indicated across multiple timeframes, setting up some very attractive resistance targets to the upside. The first real test will be around the $6.00-$6.50 resistance cluster and from there up to $7.00 and higher, with price support structured around $5.00 if required.

It is often difficult for many investors to pluck up the courage to invest in recovery stocks, but this is often where good opportunities can be found. Here we have just that as ABA looks to combine regional strength, growing domestic presence and strong fundamental performance and forecasts with a very attractive technical outlook. The ability to balance risk and reward is the name of the game here and we think ABA offers an investment opportunity that you may not want to let slip through your fingers.


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

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