Hits: 10

27 April 2020

PCF Group –Trading Update

Share Price 23p

Mkt Cap £59m

Conflict Disclosure: No Holding

 

  • Update New business volumes are down significantly in March (-26%) and April (-65%). Short and medium term operating income is strong due to previously written business and the balance sheet is reported to be strong (17% capital ratio). Portfolio to March is up 45% at £400m, with retail deposits at £340m.  25% of customers have requested forbearance.

 

  • Estimates Writing less new business generates more cash although 25% forbearance request delays cash. September 2020 PBT of £10.6m may move to the right as will the £14.8m forecast for 2021 may move to the right.

 

  • Valuation The shares are trading at book value. Current forecasts which may be high anticipate a 12.6% ROE. PE 8.7 Yield 1.7%

 

  • Conclusion There is no suggestion as yet that forbearance requests will lead to impairments but auditors may take a different view. There are some lenders trading at discounts to NAV so until it becomes clearer (results due in June) this isn’t yet a bargain. Merely good value.

6 March 2020

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PCF Group – AGM Update 

Share Price 30p

Mkt Cap £75m

Conflict Disclosure: No Holding

  • Update When a statement title starts with “strong trading” it can cause the analyst hackles to rise. The loan book has risen 55% to £395m and retail deposits have grown 71% to £346m. The prime motor product was launched in January 2020 which has caused February motor volumes to rise 80% with a lower NIm and lower impairment charge. Business finance volumes are up 5%. Bridging loan book is £21m after 12 months. Outlook is confident and the medium term ROE target of 15% is re iterated
  • Estimates Forecasts anticipate £10.6m PBT to December 20 which is a 14% ROE.
  • Valuation The shares trade at 1.3X book value which is a PER of 8.6X and a yield of 1.7%.
  • Conclusion It seems the title is right. Lending is accelerating. The loan book of £395m is 6.7X the equity so at some point further equity may be necessary. That could be the reason the shares are very cheap. Few lenders can grow fast with reducing impairments and this company looks like a long term well managed situation that could be a large company of tomorrow.

4 December 2019

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PCF Group – FY Results

Share Price 36p

Mkt Cap £90m

Conflict Disclosure: No Holding

  • Results Loan book up 55% to £339m as the company moves up the credit spectrum with 74% of originations in the top 4 credit grades. Revenue was up 51% to £22.2m and PBT up 54% to £8m. EPS up 35% to 2.7p.  DPS of 0.4p.  NIM was 7.8%, impairment was 6.3% of revenue and cost/income ratio was 35%. ROE was 12.6% with a core tier 1 ratio of 18%. Outlook is well placed to deliver.
  • Estimates Results look in line with forecasts and 24% EPS growth is expected in the coming year.
  • Valuation The shares trade at a Price/Book of 1.5% for a ROE of 12.5%. PER 12.4X Yield 1.1%
  • Conclusion Since August the shares have rallied from 25p to 35p and in the short term look up with events at the current valuation. However, by 2022 the company targets a £750m loan book and a ROE of 15% and the company is growing ahead of budget. That infers a 50% profit uplift by 2022 (3 years). So there is plenty to go for on a medium term view.

24 October 2019

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PCF Group Plc – Trading Update

Share Price 30p

Mkt cap £75m

Conflict Disclosure: No Holding

  • Update Lending portfolio is £338m, up from £276m at the half year. New business originations grew 51% as the company moves towards the prime credit grades.Accordingly NIM is reducing to 7.9% from 8.2%. The medium term target is 7%. Impairment charge is unchanged at 0.9%. Azule, the broadcast media lending business grew originations 40% in 11 months vs the 12 month prior period meaning the deferred consideration of £750k will be paid in November. Bridging originations were £14m.
  • Estimates 56% growth in PBT to £8.1m is expected to September 2019, followed by 35% growth to £10.9m in 2020. With all the metrics tracking as expected this looks comfortable. PE 10.7X yield 1.3%.
  • Valuation The company targets a loan book of £1bn with an ROA of 3% which is PAT of £30m. The ROE target corresponding with this is 15% which implies £200m of equity. At the half year the equity was £56m and the loan book is now £338m. ROE today is c.10% and the shares trade at 1.3X book. 
  • Conclusion The shares have fallen 23% over the last 12 months as the market turns its back on lenders.  The shares are now very cheap. As they move to a more prime credit risk this will be one that prospers in a difficult environment and thus looks a good time to be ‘avin a few.

5 June 2019

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PCF Group Plc – Trading Update

Share Price 30p

Mkt cap £75m

Conflict Disclosure: No Holding

  • Update Lending portfolio is £338m, up from £276m at the half year. New business originations grew 51% as the company moves towards the prime credit grades.Accordingly NIM is reducing to 7.9% from 8.2%. The medium term target is 7%. Impairment charge is unchanged at 0.9%. Azule, the broadcast media lending business grew originations 40% in 11 months vs the 12 month prior period meaning the deferred consideration of £750k will be paid in November. Bridging originations were £14m.
  • Estimates 56% growth in PBT to £8.1m is expected to September 2019, followed by 35% growth to £10.9m in 2020. With all the metrics tracking as expected this looks comfortable. PE 10.7X yield 1.3%.
  • Valuation The company targets a loan book of £1bn with an ROA of 3% which is PAT of £30m. The ROE target corresponding with this is 15% which implies £200m of equity. At the half year the equity was £56m and the loan book is now £338m. ROE today is c.10% and the shares trade at 1.3X book. 
  • Conclusion The shares have fallen 23% over the last 12 months as the market turns its back on lenders.  The shares are now very cheap. As they move to a more prime credit risk this will be one that prospers in a difficult environment and thus looks a good time to be ‘avin a few.

8 March 2019

PCF Bank – Trading Update  

Share Price 32p

Mkt Cap £69m

  • Statement Originations are up 78% year on year with the loan book up 48% to £255m. 76% of originations are prime compares to 70% a year ago which means the target of a £350m loan book will be delivered ahead of expectations.  The company reiterates its 15% ROE target and £750m loan book target.
  • Estimates Consensus looks for 3.1p EPS in the year to September 19 and 3.98p in the year to September 20. There may be room to move these up a little but we are only 5 months into the year and anything could happen this year.
  • Valuation Following the £10m equity raise Equity will be c £55m so if we impute their targeted 15% ROE we would value that at roughly 2X book value or £110m, some 59% above the current level.
  • Conclusion There is plenty of upside to go for. It is easy to grow a lender fast but to grow it without impairments becoming a problem is rare. The fact that PCF is growing into the prime space will serve them well.

5 December 2018

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PCF Group Plc – FY Results  

Share Price 37p

Mkt Cap £79m

  • Results 50% portfolio growth to £219m with deposits of £191m. NIM was 8.2% and impairments maintained at 0.5% meant PBT was up 44% to £5.2m and EPS was up 33% to 2.0p.  Core Tier 1 ratio is a healthy 19.3% and the ROE increased from 8.7% to 10.3%. Dividend up 58% to 0.3p final. Outlook is confident. Azule has been acquired since the year end which will enhance the company’s European capabilities as well as adding profits which historically were £0.8m and PCF has also entered the property bridging market. They have hired the admirably named Gerald Grimes.
  • Estimates Results are c 5% ahead of the 1.9p EPS estimate. The PAT estimate of £5.9m for the year to Sept 19 looks too low
  • Valuation The company says it is a year ahead of its plans due to strong loan book growth. The medium term target is to provide a 12.5% post tax ROE which on taday’s equity of £42.6m would be post tax earnings of £5.3m. The shares trade at 14.9X this figure.  A 12.5% ROE may merit a valuation of perhaps 2X book value which is 40p per share
  • Conclusion  It is unusual to see a bank grow its loan book at 50% while maintaining impairments at 0.5%. This is a very high quality situation with strong growth a confident outlook and reasonable valuation. Just the valuation is close to anticipating the company’s medium term targets.  It may be up with events until new strategic targets emerge.