• Jupiter’s innovation in persuading shorts to close looks masterful. As Crispin Odey’s wife is appointed to the role of Chair of Jupiter Fund Management Odey confirmed they had closed their short position
  • River & Mercantile CFO, Kevin Hayes, to retire

Provident Financial – Q3 Update and Cap Mkt Day

Share Price 437p

Mkt cap £1,107m

Conflict Disclosure: No Holding

  • Update  Trading is said to continue “in line with internal plans” with all 3 divisions producing good volumes with stable impairments. Vanquis new customers were 13% down year on year but stable quarter on quarter, while total customer numbers were 2% up year on year. Impairments are showinh an improvement and costs are flat. Moneybarn continues to grow fast with new business volume growth of 36%. Impairments are in line with prior year. No effect from the FCA motor finance consultation paper. In CCD new and returning customers are 6% up year on year while customer numbers are down from 403k to 388k. Impairments are said to be “broadly” in line with levels prior to the change in operating model – which looking back ran at c 50% of revenue- (MorsesClub recently reported 19%).  
  • Strategy The new strategy is for 5%-10% receivables growth delivering a ROE of 20%-25% with 1.4X dividend cover
  • Estimates – Trading is in line with the £164m PBT forecasts for this year.
  • Valuation PER 9.4X yield 5.9%. The company produced a 18% ROE last year and trades at 1.6X book. If we assumed the targeted say 22% ROE on today’s equity we get a 25% uplift in PBT, which could take a couple of years.
  • Conclusion If the company achieves its strategy over the next two years we can see perhaps 50% upside from a combination of earnings and valuation. It really isn’t the quality of MorsesClub and doesn’t have the growth prospects, but both are out of fashion and it could be a good foew years for this unpopular sector.  

Bank Of Georgia – Q3 Results

Share Price 1352p

Mkt Cap £644m

Conflict Disclosure: No Holding

  • Results Loan book up 29% to GEL 11.4bn. .NIM down to 5.1% (2018 6.4%) and loan yields down to 11.5% (2018 13.5%). Cost income up to 37.9% (2018 36.1%). Cost of credit 0.5% (2018 – 2.0%).
  • Estimates Assume 15% growth going forwards.
  • Valuation PER 5.6X Yield 5.8%
  • Conclusion While growth is strong this feels like a new management team in a deckining rate and declining impairment environment.  Which in general is not ideal for banks. The shares remain very cheap but it is hard to see the edge.