The ASX-listed bank share, Judo Capital Holdings Ltd (ASX: JDO), is capturing the attention of investors, with analysts forecasting significant returns. Judo Capital, known for providing loans to small and medium-sized enterprises, relies heavily on business term deposits, SMSF term deposits, and personal term deposits as its primary funding sources.
Among the analysts expressing optimism is the brokerage firm UBS, which has highlighted several reasons for investor enthusiasm surrounding Judo Capital’s future prospects.
Strong Earnings Growth and Expansion
Judo Capital recently announced its financial results for FY25, revealing a series of promising growth metrics. The company’s gross loans and advances (GLA) increased by 16% to $12.5 billion, hitting the mid-point of its guidance. This growth rate is nearly double that of the overall loan system, which the company attributes to its unique customer-centric approach and successful regional expansion. Additionally, deposits surged by 20% to $9.9 billion.
Financial performance was robust, with underlying profit before tax (PBT) rising by 14% to $125.6 million, and statutory net profit after tax (NPAT) climbing 24% to $86.4 million. UBS has noted that Judo is on track with expectations and remains optimistic about its investment potential and long-term growth trajectory.
UBS projects earnings per share (EPS) to grow at a compound annual growth rate (CAGR) of approximately 36% over the next three years, compared to just 2% for the sector.
The brokerage anticipates Judo Capital could achieve around $180 million in profit before tax by FY26, reflecting a growth rate of about 50%. UBS suggests that the Judo share price should trade near a price/earnings (P/E) ratio of 25, indicative of a “scarcity premium around growth” for global banks and the S&P/ASX 200 Index (ASX: XJO).
Future Profitability and Market Position
UBS forecasts that Judo Capital could deliver a net profit of $126 million in FY26, potentially rising to $242 million by FY29. This optimistic outlook is supported by the company’s strategic initiatives and market positioning.
In terms of share price targets, UBS has set a 12-month price target of $2.20 for Judo Capital’s shares. This suggests a potential 27% increase over the next year, which, if realized, could outperform the ASX 200’s return.
Dividend Potential and Investor Appeal
Looking further ahead, UBS is projecting that Judo Capital could begin paying dividends in FY27, with an initial yield of 1%. This payout is expected to grow to a 2.5% yield in FY28 and a 2.9% yield by FY29, making the stock even more attractive to income-focused investors.
“The future looks very positive for the ASX bank share,” UBS analysts stated, emphasizing the company’s potential for sustained growth and profitability.
Implications and Market Context
The bullish sentiment surrounding Judo Capital Holdings comes at a time when the financial sector is navigating a complex landscape of economic challenges and opportunities. The company’s focus on small and medium-sized enterprises positions it uniquely within the market, offering a specialized service that differentiates it from larger, more traditional banks.
Historically, banks that have successfully carved out niches in underserved markets have often enjoyed periods of rapid growth. Judo’s strategic expansion into regional areas could further bolster its competitive edge, as regional markets often present untapped potential for financial services.
As the global economy continues to recover and adapt post-pandemic, financial institutions like Judo Capital that demonstrate agility and customer-centric innovation are likely to thrive. Investors and analysts will be closely watching Judo’s performance in the coming years, particularly as it begins to deliver on its projected growth and profitability targets.
Overall, the outlook for Judo Capital Holdings appears promising, with strong growth prospects and a strategic focus that aligns with current market trends. As the company continues to expand and innovate, it remains a compelling option for investors seeking exposure to the financial sector.
