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Daily Grime - PFG/BGEO

ByJeremy Grime
Published 07/11/2019, 09:58
Updated 09/07/2023, 11:32

News

  • 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 (LON:JUP) Odey confirmed they had closed their short position

  • River and Mercantile Group (LON:RIV) CFO, Kevin Hayes, to retire

    • Provident Financial (LON:PFG) – 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.
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  • 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 (LON:BGEO) – 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.

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