Hits: 7

Macquarie closed its London office yesterday. Cenkos trades at NAV, all of which is held in cash (£14m) and other financial assets (£10m). It is hard to say that Arden at £5m market cap is overvalued. While finncap is £42m market cap against NTAV of £7m.

And in case we need to get in the mood for Halloween lets remember how well monetary policy has worked.

Non Standard Finance and others – M&A potential

Share price 38p

Mkt cap £116m

Conflict Disclosure: No Holding

  • Changes The departure of Miles Cresswell Turner from Non-Standard Finance last week is perhaps predictable as the LTIP is predicated on a share price of 110p and the founder shares require a share price of 125p by March 2020 which at 38p will need some tailwinds.  Blowy ones.  With a diminished financial incentive those that are financially motivated may well take a look at the valuation of the company and see better ways of making money than being employed by it. A PER of 6.7X and yield of 7.8%. But with £27m headroom of the £285m facility at the end of June we may question the company’s ability to continue the growth and the dividend without new funding- which is being sought.
  • Private Equity It has been said that venture capitalists can be financially motivated. Prior to Non-Standard Finance Miles Cresswell Turner was at Duke Street Capital and Palamon partners for 10 years prior to that.  I can’t imagine it would be difficult to persuade private equity of the potential gains to be had from taking NSF private at a time when new debt facilities are being sought and management incentives are expiring while it trades on 6.7X earnings just as growth is slowing and profitability is set to expand.  It may be true that in the absence of the Provident combination and a slowing roll out of branches there is less to do at NSF. But it may be that with 1.08m shares in NSF there are better ways to make money for the financially motivated.
  • Valuation Potential The NAV of the company is £210m, of which £154m is intangible. This is after £33m of those intangibles have been amortised so NAV at cost is £243m, some 109% ahead of the current market cap. With Alchemy holding 19% and Invesco holding 28% it can’t be long until a non-public markets outcome is found. One has to imagine there is 50% upside on a bid or break up. 
  • Others  No doubt the irony of launching a bid for NSF wouldn’t be lost on the board of Provident, which trades on a PE of 9.4X and 1.6X NAV. But they could face private equity competition. Then we have Amigo, the guarantor loans business trading on a PE of 4X.  I suspect we are going to experience some M&A activity in the sector.

[email protected]