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Finally a decent up day, maybe Artemis have finished reducing their position. If so, we might have turned the corner in the short term. A decent update and competing the loans review would consolidate the share price which seems to factor in a lot of bad news right now.
Am currently looking into this and am curious by your comment that the reduced liabilities is because they had money from not lending it out which will impact future profits.
Does anyone know what sort of loans HAT gives out ordinarily? And do we know how much of their profits come from loaning out money?
Basically trying to work out when we can expect to see the impact of the reduced levels of lending.
And, more broadly speaking, I'm trying to estimate what their profits will look like, and why the share price has fallen from 315-20p down to 250-260p ish. Know some of it is to do with this going ex-divi on 3 Sept but there's clearly much more to it than that.
Blimey this has fallen to 250p - wasn't expecting that so fast!
Don't want to catch a falling knife so am going to watch and wait for now but yeah I'm certainly interested at this sort of level.
You might see it, Artemis have been dumping there's and the daily volume isn't even close to absorbing that amount of shares.
Almost at 260p, so now I'm tempted !
taken my first tranche of shares today will now wait a little while to see where the sp goes from here before adding. i like to buy in 2-3 tranches to build my desired holding in any stock.
i do see a positive outlook for this stock over the next 1-2 years. jmho.
Added some more today on the recent weakness, at 260p I'd be adding a whole lot more!
Would probably be tempted at that sort of price...
- Even Boris has come out to state 2nd National Lockdown will not happen - impact on economy too devastating.
- If regional lockdown, e.g. leicester, shops were allowed to open.
So jewelry retail suffers? Yes
Gold purchasing suffers? No - thrives more in lockdown (less employment / no furlough scheme - where do you get fast cash from? Ans - sell your gold)
Forex suffers - yes - but was only 8% of total GP in the 1st place (8% included other services including meony remittance) Pawnbroking suffers? No - thrives in lockdown
Existing Loans collection suffers? Yes likely - to what extent? On par with all other unsecured lenders.
New Loans issuance suffers? No but higher prudency
Overall, come Autumn, given higher redundancies (sadly), termination of furlough scheme, high unemployment - more people are likely to pawn their stuff and sell their gold.
Hence pawnbrokers more likely to thrive.
Not being dismissive, w.r.t FCA investigation, Simon Thompson has already commented in IC that the high interest short term loan interest element of HAT's loan portfolio is small , therefore market's reaction (late 2019) to FCA's enquiry likely to be over-reaction.
Current SP of 300-310p appears to be support level. If falls through this, it would be levels seen in late April - which is highly unlikely. DYOR.
With thanks to scotches over on the ADVFN board...
CEO give a good account of the last 6 months and the outlook.
Debt was cleared through cash received from redemptions made on the pledge book, dividend paid out from cash.
It has not been quite as resilient as I was expecting, especially as it opened earlier than some shops. Comparison with H1 19 rather flatters given the expansion of the estate in H2. However, it was doing well in Q1, the loan book value is increasing and sales /fx are picking up along with an increasing pawn book so I am holding.
Mixed sentiment about debt reduction, on one hand 11m reduction is good and illustrates the conservative approach of the company, but it is mainly because they were not lending which therefore affects future profits.
I also hold FRP (and similar) but for this sector, along with HAT, I think that it will be a while before the full impact of covid feeds through to give positive results for these companies..
The market seems supremely uninterested in H&T today but Questor also has this as a hold with lots of positive comments. I think they were able to remain partly open as an essential financial supplier but chose not to. Any second wave might therefore not result in exactly the same shutdown. The decent gesture of providing debt holidays may also not continue and that would certainly positively impact the bottom line. Having paid all their debt off, they're well placed to grow further (unlikely) or pay increased dividends. The cautious reintroduction of a dividend payment albeit at a reduced level seems to reflect this and suggests a return to the previous level (or more); is feasible. Growing unemployment without the furlough scheme can surely only be good business for H&T.
When it moves, it tends to move quickly so monitoring closely and attempting to time an investment is definitely sound thinking.
Agree that the debt reduction / position is impressive. Especially after the acquisitions made last year.
So, to be clear, I meant the risk vs reward doesn't look great in the immediate term, with the potential 2nd wave causing shops to re-shut (they're already talking about pubs shutting next month!), which could be an issue now that they have more shops than ever before. Plus, without the furlough scheme, costs will increase vs last time as well.
Whilst, in the longer term, I stand by what I said a few weeks ago about HAT being a net beneficiary of the economic downturn.
i.e. I wouldn't invest in HAT right now but I will continue to monitor it because it could become an attractive opportunity as time progresses.
'Weak sell' was probably too harsh, so have amended my opinion to 'Hold'
All true enough however decreased footfall was always going to have an impact and I note they've completely paid off their debt ...£11 million of it! For a company with a relatively low capitalisation that's a significant amount.
The Group's balance sheet remains strong with zero net debt (30 June 2019: GBP11.6m)
- H1 profits down to £5m (vs £6.8m)
- H1 gold profits were £2.8m, up from £1.3m, due to higher prices
- H1 profits excl gold profits were only £2.2m (vs £5.5m)!
- Dividend has been slashed in half almost, down to 2.5p (vs 4.7p)
- FCA Probe still ongoing - was hoping more progress to remove this rain cloud would've been made
The profits excl gold concern me here, esp when you consider how they took advantage of the furlough scheme and cut exec pay etc. It shows that the business cannot cope without their stores being open, they were evidently loss-making during lockdown, and it isn't like there was pent-up demand when they came out the other side of it, otherwise these results would look better. And what if there is a second wave causing another lockdown? Without the furlough scheme the business will become even more loss-making than it was first time around.
Consequently, rather than being a hedge against everything going on, it now looks like it's yet another company that's a victim and vulnerable to this unpredictable pandemic.
On this basis, I remain too unconvinced at this pricing level to consider investing (the risk vs reward isn't attractive), especially when there appear to be better ways to benefit / hedge against the economic downturn (my hedges are Direct Line Group and FRP Advisory)
DYOR and good luck to you all
Correct, RFX is much more reliant on foreign currency exchange (people going on holiday!), which is why I now believe HAT is the better investment out of the two.
Have to admit I haven't bought in yet because DLG and BMN are my focus for now, but I do intend to jump in within the next 3 weeks, so am keeping a close eye on this.
When I last checked, rfx had a much larger proportion of its revenue derived from currency exchange. I thought that this may take longer to recover than HAT's offerings.
I still think it is a good mid/long term investment and remain invested.
I wonder if the recent fall is a response to the situation at AMIGO, although the two are by no means comparable? If I recall, HAT only had 24m in interest payments on their entire HCSTC loans over the last 6year period. They seem to be very rarely mentioned on Debt Camel which is the main got to site for people looking for refund information, so I take this as a positive.
Looks like I’ve cursed this share with my presence in almost record time with a 5% in 2 days hahaa
Lack of mojo suggests sub 300p could be on the cards
Watching with intrigue and curious to hear opinions about what I wrote below
I'm definitely going to invest in one of them soon because I'm convinced the pawnbrokers will do incredibly well in the years ahead, and will serve as an excellent hedge against a second wave or a downturn in the stock market in general.
Looking at trailing multiples I wasn't blown away by a EV/EBIT of circa 11 however, based on my back-of-the-fag-packet calculations, it looks as though there should be ~20% organic growth in a "normal year" which would mean the forward EV/EBIT ratio is about 9-9.5, the forward PE ratio is less than 7, and the dividend will be reinstated as well.
The growth may accelerate further still, given that demand for pawnbroking will increase during the downturn and gold prices are comfortably higher than prior years.
The company is also rather acquisitive from what I can see, buying the former Money Shop business and the former A&B business. The former (65 stores focused on foreign currency exchange) will probably not do so well in the short term but perhaps they could be temporary repurposed to take advantage of the expected increase in demand for pawnbrokers. The latter was a truly excellent acquisition which I believe is the primary reason why HAT exceeded all expectations of its Revenue, Profit, EPS expectations in 2019 and had a stellar H2.
It is worth noting the A&B acquisitive growth all came in Q4 and therefore we are yet to see the full effect of this.
Looking at the negatives:
- The rent for their 253 stores during the approx 2 month lockdown period would still have needed to be paid I presume.
- The Foreign Currency business will do comparatively poorly but, at least prior to the Money Shop acquisition, this accounted for a v small % of revenues anyway
- HAT have had to halt all high-cost-short-term unsecured loan lending. However this only accounted for 4% of revenues anyway.
- The FCA Probe hangs over this share like a cloud. I do not believe the FCA will take any material action against HAT but the fact this share has traded beneath its Oct 2019 highs of ~400p suggest it is still having some sort of impact. However, on the other hand, this is perhaps why there is such an opportunity here.
- HAT have taken advantage of govt schemes (notably the furlough scheme) and cut exec pay by 50%.
- HAT have taken advantage of incredibly high gold prices
- Consequently "net debt has reduced" during this lockdown period, which is remarkable.
Taking everything into account, I believe this is a high-growth share (with both high organic and acquisitive growth) trading at fair-to-low value (perhaps because of the ongoing FCA probe), so is worth investing into.
Agree it looks good. And would I be correct in thinking that the FCA Review has finished / is coming to end with a positive outcome too?
Agree, that the update appears positive. And would I be right in thinking that the FCA Review has concluded in a positive way too?
They run a tight ship, although revenues were 'materially impacted ' net debt has been reduced and they are setup to expand their pledge book going forward.
FCA - still unresolved but moving forwards.
Very happy with this update.