Another Misunderstood Spin-Off, page-24

"MA, You are only comparing to Australian Banks, but it was already shown above that CYB is on a comparable price to book ratio as other Scottish banks, and seems to be priced against those, rather than against Aus banks. I'm not getting why we would be expecting that CYB is going to streak ahead of the Scottish pack..."

CYB may be priced on a similar P/B as RBS and Barclays, but the investment thesis for CYB is that it grows its earnings by a CAGR by 20%pa over the next few years.

I'm not sure RBS or Barclays or any other bank will do that.

So P/B is one thing, but absolute earnings growth is the thing that will drive the share price.

And incidentally, it is well-known that RBS is still subject to potentially billions more pounds of RMBS-related litigation which is likely unlikely to be finalised for many more months, the outcome of which might require an equity raising, so this no doubt represents a significant overhang over that company's stock price. That, and the fact that the UK government's stake is up for sale.

So there are some rather major issues that are peculiar to RBS that are likely to be acting as an anchor on its share price.

Which makes me skeptical that RBS makes for a sensible comparator company.

(And, hey, maybe its a case that all the UK banks are roaring buys.)


But anyway, my personal investment mandate doesn't dictate that I need to own one particular bank with a view to outperforming a group of its peers.

My investment objective is to create absolute, not relative, wealth for myself in risk-adjusted, real terms.

Absent some imponderable extraneous risks such as the possibility of Brexit eventuating, ro some lunatics flying aeroplanes into some tall buildings, the starting valuation for CYB suggests to me that the downside risk is limited.

Put another way, the stock is certainly not nearly priced like it is going to organically more than double its profits over my investment time horizon.


"...moreover, any divi paid is not going to be franked, hence a further shunning of the stock?"

Don't make the mistake that thinking this is a stock that has any "Aussie-centricity" about it whatsoever, meaning the issue of non-franking is, well, a distinct non-issue, actually.

I can assure you that the marginal buyer here is not a dividend-hungry mum 'n dad investor based in the Antipodes; rather, the marginal buyer is some European institutional investor or some global investor with a mid-cap mandate.

(I put it to you that the very reason the stock started its listed life so limply was because Australian-domiciled investors very soon after listing sold their inherited holdings for the very reason of the dividend...and not just that it was unfranked, but that there wasn't going to be any dividend for the first 18 months. This is actually what created the buying opportunity, methinks)