I ended my last writeup on Nordfyns Bank by teasing another bank that is the best opportunity to play the Danish bank consolidation story.
It’s remarkable how similar this setup is to Nordfyns Bank before its recent 50% run-up in a month. And even if this bank isn’t acquired, it’s still incredibly cheap — a rerating waiting to happen. Look at these stats:
And then these:
For this bank to approach the book multiple of Nordfyns Bank, it would have to rerate by 50%, and that’s without counting the share of synergies in an acquisition. This is a better bank trading at a substantial discount. But there’s more: Whereas Nordfyns Bank competes directly with two prominent, larger peers, this bank was, until very recently, essentially the only locally anchored bank in its area, playing an indispensable role in its locality. “Until recently”, because another bank just entered its turf. And while this could be perceived as a danger, it’s underpinning the acquisition story (more on this later). But there’s more: This bank’s local market area is now benefiting from being at the entry point of one of Denmark’s largest infrastructure projects in recent times, one which is ongoing for the next half-decade, with the fruits to be harvested by the community for decades.
The stock market is odd. There are times when a stock sells for substantially less than what a third party would pay in a privately negotiated transaction. I believe this is one of those times.