Hits: 21

30 April 2020

IPF – Q1 Update

Share Price 46p

Mkt Cap £104m

Conflict Disclosure: No Holding

 

  • Update  Q1 credit issued contracted 15% and collections in Q1 were 95% of budget.  Equity to receivables was 47.6% and £217m cash with headroom on facilities. Collections fell to 76% of budget in April. Similar is expected in May with improvements anticipated thereafter. Importantly the company says it was net cashflow positive in April to date. Shorter term loans in Poland and Hungary are enabling the company to service the higher quality customers despite the temporary rate caps, while many customer are ignoring the moratorium and paying their loans anyway in Romania, Czech republic and Hungary. Digital collections are at 82%.

 

  • Valuation NAV is £436m and mkt Cap £104m

 

  • View This is hardly an investment with the extreme uncertainty, more of a gamble. But for those that fancy a gamble a 75% discount to NAV has its attractions.

1 April 2020

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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.

20 March 2020

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International Personal Finance – COVID statement 

Share Price 72p

Mkt Cap £162m

Conflict Disclosure: No Holding

  • Statement The company has suspended agent home visits in Poland and made arrangements for customers to pay remotely. In the first 10 weeks of 2020 there was no discernible impact of COVID-19 on credit issued or collections. However, actions now taken, together with Hungary’s allowing consumers to avail of a debt repayment moratorium, the company now expects collections and credit issued to be adversely impacted, but is unable to quantify this. Further update on 30 April
  • Estimates In Dec 20 £63m PBT is expected from revenue of £883m.
  • Valuation NAV is c £436m. Loan book £973m. The company notes an equity to receivables ratio of 45%. Of the NAV c. £66m are intangibles.
  • Conclusion After so many legislative and regulatory headwinds it is hard to imagine IPF being high on governments list of people to help.  If the company closed it doors and ran off its short duration loan book shareholders may well get more than the current share price.

26 February 2020

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International Personal Finance – FY Results 

Share Price 163p

Mkt Cap £364m

Conflict Disclosure: No Holding

  • Results Credit issued is in line with prior, but revenue grew 3% to £889m year while the impairments were 27.4% (2018 26.2%) delivering a 4.7% increase in PBT to £114m. EPS 114p and a held dividend of 12.4p. Divisionally £115m PBT was delivered by Europe and £10.5m from Mexico. IPF digital produced a maiden profit of £3.2m. Gearing is low with equity /receivables of 44.8%. The regulatory outlook is key. The polish rate cap reduction is no longer on the legislative agenda since the election but the competition authorities are reviewing early rebate practices. This is expected to have a £5-£15m impact on IPF. Romanian rate caps are unlikely to have a large impact currently. The Polish tax audit has been settled with a payment of £3.8m though the years 2008 and 2009 remain open. The EU state aid investigation involves £13.9m of benefit at risk.
  • Estimates PBT is politely ahead of the £112m consensus. 7% revenue and PBT growth is expected in 2020.
  • Valuation Net asset value is £436m and NTAV is £370m, both above the current market cap.The company has just delivered a 16.5% ROE. PE 5.8, yield 7.6%
  • Conclusion The company has been thoroughly batter by regulators, governments and the EU. With such huge uncertainties owning the stock has been more of a gamble than an investment. With the settlement of the large part of the tax investigation and the polish election the shares have rallied from 85p to 163p, but the shares are beginning to look more like an investment. There could still be room for them to double from here.

31 October 2019

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International Personal Finance – Q3 Update 

Share price 128p

Mkt cap £288m

Conflict Disclosure: No Holding

  • Update Trading is said to be “on track”. Europe credit growth is 6% while Mexico is down 12% as the company focuses on credit quality. Digital grew 3% as the company focuses on containing impairments, which ran at 43.7%. Impairments in middle of range at 27.8%. £197m headroom on facilities. The polish tax audit is concluded for 2010-2017 with earlier years now close to finalised. No further regulatory developments. Outlook is “on track”
  • Estimates A modest improvement in PBT to £113m is expected in 2019 which is forecast to accelerate to 11% in 2020.  Digital is expected to deliver its maiden profit in 2019.
  • Valuation The PER is 4.5X and yield 9.8% from a modestly geared balance sheet which has a NAV of £453m, some 57% ahead of the current share price.
  • Conclusion  With such an interesting valuation every investment bone makes me want to own this. But with the vast majority of the profits coming from Poland where the impact of the yet to be ratified rate cap and charge cap limits unclear it still remains in the “punt” camp rather than the “investment” camp. Frustrating.

31 July 2019

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International Personal Finance – H1 Results  

Share Price 109p

Mkt Cap £243m

Conflict Disclosure: No holding

  • Results. PBT £56.1m is flat on the prior year with IPF digital growing strongly.  European home credit delivered £60.2m PBT from a low impairment rate of 15.7% and 2% increase in credit issued. Mexico reduced its PBT to £3.5m and IPF digital grew its credit issued by 28% with a modest loss of £0.4m. The statement confirms profitability is expected in 2019. No new regulatory developments. Outlook is in line with expectations driven by Europe ahead and Mexico behind.
  • Estimates FY PBT is anticipated to be £113.1m
  • Valuation PER 4.X Yield 11.6%. ROE 16% and P/Book 0.6X
  • Conclusion   The company will update in September when the EU has commented on the Polish regulatory proposals.  There is uncertainty over that but ultimately this company will be driven by the Digital business.  Currently we are in the dark on the effect of the European interest rate caps.  The darkest moment however is always before dawn. I suspect that may be towards the end of this year.

28 June 2019

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International Personal Finance – Poland Update 

Share Price 148p

Mkt Cap £331m

Conflict disclosure: No Holding

  • Update – Rate cap proposals have been modified to reduce the non interest cap on fees from 30% per annum to 10% per annum and from 25% of the loan value to 10% of the loan value.  These will need to go through the EU for review and comment and may further be modified. No assessment of the impact is provided.
  • Estimates –. PBT is expected to grow 3% this year to £113m. Currently around 90% of this is from Europe of which Poland is a very material part but no longer separately disclosed.
  • Valuation Per 5X yield 8.5%.  Price/Book value is 0.76X.
  • Conclusion  The uncertainties are huge but the valuation is also very persuasive.  Once we get clarity on the impact the valuation will change. My suspicion is the travelling is worse than the arriving but until we get clarity on the impact we can’t know that.

2 May 2019

International Personal Finance – Q1 Trading Update 

Share Price 186p

Mkt cap £417m

Disclosure: No holding

  • Update Credit growth 9% which is made up of 2% Europe, 3% Mexico and 33% IPF digital. Impairment low at 26.6% (2018 26.4%). Mexico is challenging where impairment rates increased to 38.4% but the company remains confident in the development of the business. IPF digital is on track to deliver a maiden profit in 2019 and the funding headroom is £183m. No update on the Polich regulation changes. Outllok for 2019 unchanged.
  • Estimates EPS of 28.5p not expected to change for 2019 increasing to 33.5p in 2020.
  • Valuation PER 6 yield 6.7%. Price/Book value 0.96 for a ROE of 16%
  • Conclusion I have a secret admiration for this stock which despite more hadwinds than storm Hannah delivers a 16% ROE. This is a stock to buy ion the storms because when the storm clears the market usually mistakes it for a growth stock. Especially when the digital business becomes the growth driver.