VMUK LN

Publicly traded companies mentioned herein: Virgin Money UK PLC (VMUK LN)

Highlights

The presenter is long shares of Virgin Money UK PLC (VMUK LN), which is a UK bank trading at a distressed valuation (0.36x TB) despite having strong excess capital and return on tangible equity (RoTE) that should exceed 11% in the coming years. VMUK was formerly Clydesdale Bank, a legacy brick and mortar bank in Northern England and Scotland that was spun out of National Australia Bank (NAB AU) in 2016. NAB IPO’d a 25% stake of Clydesdale in London and spun off the remaining 75% to Australian shareholders. It then acquired Virgin Money in 2018 and rebranded to Virgin Money UK. As a smaller UK bank mostly owned by Australian investors and covered by large UK bank analysts, VMUK has been somewhat of an orphaned stock and can experience volatility in risk-off times. That sets up this timely opportunity, as the stock has traded down ~30% from its January highs despite no fundamental news and some positive updates. As the company starts to execute on its RoTE expansion opportunity and capital return program, he would expect a multiple rerating to ~1x P/TB, implying a tripling of the share price from the current GBp139.