News

  • Randall & Quilter recruits KPMG’s Global Head of insurance restructuring as Chief Restructuring Officer.  No doubt tasked to eek some more profits releases from those legacy portfolios.
  • Intermediate Capital appoints Lord Davies of Abersoch as Chairman-Designate
  • STM gets authorisation from The Pension Regulator for its workplace Master Trust. The statement notes that only 39 Master Trusts applied for authorisation from 80 in existence implying there is likely to be further consolidation which STM aims to participate in.

Provident Financial – Revisit

Share Price 404p

Mkt Cap £1025m

Conflict Disclosure: No Holding

  • Revisit Markets have been rangebound for 2 years now and its getting dull. Meanwhile things at some companies have changed a lot. So it may be worth revisiting where Provident stands at the moment. In the H1 results to June Vanquis produced £85m PBT, Moneybarn £15.5m while CCD lost £15.1m. Then central costs of £10.5m were deducted. Vanquis revenue yield has now reduced to 41.6% on the withdrawal of the ROP product while impairments are improving to 15.1% from 15.6%. The run rate of costs has reduced also and the cost income is 49% in H1. Demand is reported to be strong. Moneybarn continues to grow, 26% in H1 while impairments were coming down from 14% to 12.3% while the cost income ratio is 41%. CCD, the loss maker, shrank 30% in H1 although this was reported to be growing again during Q4 following the removal of the 200k non-paying customers. Importantly in this division the loan book duration is shortening which has the double benefit of higher yields and lower impairments.  All these division have the look of having passed through the eye of the needle.
  • Estimates Forecasts anticipate £165m PBT for the full year which implies a modestly better H2 performance.That is 48p EPS. As a reminder the company reported 131p EPS in 2016.
  • Valuation In this sub par year the ROE is 20% while the company is valued at 1.5X book value. IN PE terms that is 8.5X with a 6.6% yield.
  • Conclusion It is not difficult to see a situation where this could double in the next two years from a combination of valuation uplift and earnings improvement. The biggest worry may be that Woodford owns 16% of it still. But it may be time to do a deeper dive and take a look.

Equals Group – New Product

Share Price 86p

Mkt Cap £154m

Conflict Disclosure: No Holding

  • New Product. Equals launches its first live SME loan product using iwoca’s funding. The product is the “CardOneMoney Platinum Business Loan. Credit decisions are made within minutes when customers gat a virtual mastercard which is usable online. The statement says this is a new and “significant” revenue opportunity for the Group and will be the first of many credit-related products they will launch. This follows rapidly on the heels of H1 results which reported Adjusted EBITDA growth of 78% to £4.7m.
  • Estimates Forecasts anticipate £9.8m PBT for the full year which is followed by 54% growth in 2020 fading to 26% in 2021.
  • Valuation PER 14.9X. No dividend.
  • Conclusion  This looks like an opportunity to acquire a small and profitable of Monzo or Revolut growing fast.  The shares are at their lowest for 18 months. The shares are under owned by institutions. Opportunity knocks.

jeremy@charltonillingworth.co.uk