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Why Navigator Global looks like a buy

The Navigator Global Investments Ltd (ASX: NGI) share price has gained more than 63 per cent over the past year and there are signs that 2018 will be another good year for the company’s shareholders.

Navigator Global, a holdings company with a market capitalisation of around $615 million, had assets under management of around US$10.5 billion by the end of 2017.

The company, formerly known as HFA Holdings Limited, posted a net profit after tax of US$17.7 million for financial year 2017, an increase of around 25 per cent on the prior corresponding period.

Navigator has a good record of growth over the past five years as assets under management also steadily increased.

In FY 2013 Navigator posted a gross operating revenue of $60.3 million which rose to $73.8 million for FY 2017.

As such, shareholders have enjoyed a steady increase in dividends over the past five years.

In FY 2013 Navigator paid shareholders a dividend of 6 cents per share which increased to 14 cents per share for FY 2017.

At the company’s current share price of $3.80 that works out to a trailing yield of about 3.7 per cent.

Although the company announced that its operating costs for the six month period ending December 31 had increased by $3 million on the prior six month period, the company’s increased costs will likely be offset by its higher EBITDA guidance.

Navigator stated that its EBITDA for the first half of 2018 is expected to be 14 per cent higher than the first half of 2017.

The company’s shares are currently changing hands for around 27x trailing earns which stacks up fairly well when compared to others in the sector.

Platinum Asset Management Limited (ASX: PTM) and EQT Holdings Ltd (ASX: EQT) both see their shares trade for around 26x earnings.

The company also has significant exposure to the US markets and such is likely to eventually benefit from the reduction in the US federal corporate tax rate from 35 per cent to 21 per cent effective from 1 January 2018.

As such, Navigator Global Investments Ltd is looking like a buy.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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