STB/DUKE/STM

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It’s a strange world when State Street’s ETF holds more gold than the Japanese central bank, amongst others 

High Cost Lenders

  • FCA publishes it finding from its review into relending by credit firms. It finds some poor practise and gives the example of online lenders encouraging more lending by advertising holidays in exotic locations. Note that home collected credit is not within the definition of high cost credit. But it appears high cost lenders may be going the way of tobacco companies in advertising ability.

Secure Trust Bank – H1 Results

Share Price 576p

Mkt Cap 107m

Conflict Disclosure: No Holding 

  • Results PBT £5.1m (2019 £18,1m). Consumer finance book reduced modestly to £1,124m led by retail finance down 6% and motor down 10.7%. Business finance balances grew 9.2% to £1,248m. Real estate grew 7.8% and commercial 23.9%. NIM was 6.4% (2019 6.7%). Cost income 52.7% (2019 55.9%) and cost of risk was 2.9%(2019 1.7%). ROE declined from 12.7% to 3.5% while the Tier 1 ratio increased to 13.5% (2019 12.8%). Guidance remains withheld due to uncertainty. 
  • Estimates A 6% reduction in revenue is forecast for the full year and £7.4m PBT which could be higher depending on the performance when payment holidays pass. Last year the company made £38.7m PBT. 
  • Valuation Net tangible assets are £260m which compares to £107m market cap. The company remains profitable with a strong balance sheet. 
  • Conclusion The company remains profitable and has an increasingly strong balance sheet.  It has historically delivered a 13.5% ROE so we could be forgiven for expecting the shares to trade above NAV if the market believed in recovery. The shares remain at their low for the year.

Duke Royalty –Trading Update

Share Price 20.5p

Mkt Cap £50.6m

Conflict Disclosure: No Holding

  • Update Most of its royalty partners have experienced a significant upturn in trading during May and June. Q1 21 cash distributions and cash gains from sales of equity assets totalled £2m which is down 20% on prior year. Cash costs decreased 15% meaning the company remains profitable on a cash basis. Q2 cash revenue is expected to exceed the prior year.
  • Valuation NAV £72m, 42% ahead of the current share price.
  • Conclusion The company looks to have turned the corner while remaining profitable. The equitized arrears also provides for some recovery with upside. The shares traded at 50p prior to the pandemic and may well return towards those levels later this year.

STM Group– Trading Update

Share Price 27.5p

Mkt Cap £16.3m

Conflict Disclosure: I Hold

  • Update New business pipeline continues to grow, though conversion times on flexible annuity and bulk transfers of work place pensions is slower. An acceleration will be required in H2 for the company to hit their new business revenue targets. QROPs and SIPPs remain steady.
  • Estimates In 2020 £2.7m PBT is anticipated followed by £4.5m in 2021. These numbers may move to the right.
  • Valuation PE 7.4X falling to 4.4X. Yield 6.2%
  • Conclusion The company has potential which has taken a long time to deliver as the process of investment and restructuring while it gains scale through acquisitions has taken a long time. Patience may be needed but the upside potential is more than 100%.