First Active retains Goodbody Stockbrokers buy recommendation

FIRST Active is still a buy according to Goodbody Stockbrokers, who predict its share price will hit €5.50.

The former building society shares opened yesterday at €4.77, below the shares’ 2002 high of €5.30 but well ahead of their January 2 low for the year of €3.25.

Goodbody analyst Len Riddell yesterday reiterated the firm’s buy recommendation following what he said was a confident meeting with management.

He said: “The key driver behind value creation for First Active remains sticking to the knitting.

“As a pure-play on one of the fastest-growing mortgage and savings markets in Europe, the issue of business mix diversification is, rightly, irrelevant.”

Mr Riddell says equity release remains a strong driver behind domestic volume growth.

“Buy-to-let lending accounts for circa 25% of volumes for the year to date, mostly to existing customers.

“First Active retains a conservative stance in this segment and similar criteria as for owner-occupier mortgages.”

Mr Riddell says the group is, rightly, in no hurry to spend surplus capital of over $100m.

First Active has been one of the stellar performers of the Irish Stock Exchange this year with its market capitalisation growing to €700m from €460m since the start of the year.

One of the drivers of the share price has also been the fact the company will become an attractive takeover candidate once its takeover protection expires in October 2003.

Looking to the long term, Merrion Capital, for example, believe a takeout price of up to €7 could be achieved.

Permanent TSB and the Royal Bank of Scotland are seen as well placed among others to take the mortgage lender and its 16% share of the Irish market over.

With 80% of shareholders former clients of the building society, liquidity may be limited as small time investors wait for a takeover payday.