AGFX/IPF/UEX/FCAP

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Argentex – Trading Update

Share Price 100p

Mkt Cap £113m

Conflict Disclosure:No Holding

  • Update –For the year to March revenue is up 30% to £29m, with 450 new corporate clients added. No issues with forward margins here and the company makes the point that it maintains its historic balance of currencies with 95% of the LLP’s portfolio comprised of dollar, sterling and Euro trades and a balance between spot and forward trades. The outlook refers to their credit worthy client base. The growth is sustained and the company is confident of meeting full year expectations.
  • Estimates – March 20 EPS expectations are for 8.7p which is PBT of £11.8m, a 41% operating margin. Going forward 11% growth in EPS is anticipated.
  • Valuation The shares have halved during the recent market falls. PE to March 21 is 10.9X and yield 3%
  • Conclusion Unaffected by COVID 19. Shares will recover strongly. 50% may be a reasonable expectation.

International Personal Finance – COVID 19 Update

Share Price 76p

Mkt Cap £170m

Conflict Disclosure: No Holding

  • Update Regulators are introducing measures such as debt repayment moratoriums. Poland reduces flat rate cap from 25% to 15% and variable from 30% to 6%. Hungary reduces maximum rate to base plus 5% and introduces repayment moratorium. Romania introduces moratorium for those not in default and proposals under discussion in Czech republic. Too early to quantify financial impact but capex and salary increases deferred, dividend cancelled and lending restricted.
  • Balance Sheet The company says equity to receivables was 45% at end Feb 2020 and it has headroom on debt facilities of £203m.
  • Valuation The NAV is forecast to be £405m versus a £170m market cap. In 2019 the European Home Credit contributed £115m of PBT which is all the PBT as the other divisions cover the central cost. In this division impairments to revenue was 12%.  The profit margin was 25% so all other thigs equal the impairments can rise to 37% before the company becomes loss making.
  • Conclusion It seems the regulators are expecting lenders to bail out the consumer so there are a lot of uncertainties here and we next get an update on 30 April. With £400m of equity and £200m of headroom the business may survive but that is speculation rather than investment.

Urban Exposure – Update

Share price 35p

Mkt Cap £55m

Conflict Disclosure: No Holding

  • Update The sale of the loan book to Honeycomb had been scheduled to complete today, 1 April, and the company has received notice of termination. Urban Exposure considers this is without merit and reserves its position.   
  • Valuation Price/ NTAV 0.4
  • Conclusion This looks like its now down to the lawyers to sort out, which may be expensive. With Pollen Street recently having had a spat with the board of PS Secured Lending plc Board there may be some reputational issues at stake as well.

Finncap Group Plc

Share Price 17.5p

Mkt cap £29.7m

Conflict Disclosure: No Holding

  • Trading Update Equity Capital Markets performed in line with H1 (£9.2m turnover) and M&A division is behind the first half’s £5m revenue. FY revenue is expected to be £25.8m which implies £2.4m revenue from the M&A division. Breakeven in H2 means £1.4m PBT for the FY. Pipeline is strong but uncertain. Dividend cancelled, salary cuts but 5.3m 1p options granted to staff.
  • Balance Sheet Cash was £5.1m at September and net tangible assets £7.9m
  • Conclusion This is the first time I have seen nil priced options issued in exchange for salary sacrifice. It amounts to a rescue issue with the staff.