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Northern Rock money was mainly secured on real estate - they just lent it our at 110% LTV on already inflated values.
My point on Net Assets is this:
If everything in the business was wound down today at carrying value there would be >£600m to distribute to shareholders. This £600m ALREADY includes provisioning (read the PFG interims they have a breakdown of assumed stress modelling which is relatively robust - unemployment levels, default levels etc). The share price is valuing business at fast approaching £300m. So half the already-provisioned break-up value.
If you have the opportunity to buy £1 coins for 50p it usually makes sense, provided you think that even in a worst case those £1 coins are worth more than 70p.
MLM makes the point regularly (and is proved out in past recessions), PFG customers are better at copping with economic stress. They don't have mortgages, many will have income support (With a govt that aims to support low earners / unemployed going forward) - they usually make ends meet.
Finally, some of PFG's book is secured - car finance (that said I'd be less confident 2nd hand car values in the months ahead, but they're still collateralised).
There is a point where any business is trading at such a discount a PE firm can't refuse it. PFG's banking license and therefore ability to raise retail funding deposits alone has significant value.
As useless as management are proving themselves to be (particularly in communications skills), the discount on this share price has become insane.
Do we deduce ...
No Capital Markets Day == no financial targets, no customer vision no growth strategy ?
MLM July 26th
"the Group intends to hold a Capital Markets Day to update the market on its financial targets, customer vision and growth strategy."
Why would anybody want to buy an unsecured loan book in this climate ?? Remember Northern Rock
As a holder when the previous synthetic takeover fiasco plays out then you have very little control.
I'm similar to you that I'm in closer the £3 and still of the view with a semi competent management team and governmental circus settling down these are worth £5+.
A takeover bid at £2 would be £500m and still less than Net assets (and remember the net assets includes!!! provisions - so is already favoring in impairments). If someone offered £2.50 and walked up to £3.00 I'd live with that for my sanity now.
It's perfect company to privatise, so take it out the constant negative attention of the market and analysts, improve the management structure, then re-list it on FTSE in 3 or 4 years when world has settled a bit.... Could easily be worth £10 per share then which is tidy return for PE purchasing business at £3.
Id take any bit of positive excitement now.
I'm also determined to be at results and next AGM in person to raise these points.
If this company doesn’t go bust someone is going to make a lot of money at these levels
My average is 275 on last 3,000 shares so I’m going to average down to 240 if I can raise cash and make up losses elsewhere
@Theborn: fully agree.
Question: if the company becomes the take over target, what options do the retail investors have to avoid their losses?
E.g. if my average on 11000 shares is 2.9 pound / share, but as the hostile offer would be e.g. 2 pound per share...?
And e.g. if the book value is 3 pound / share?
How shall the retail investor proceed to not lose the money?
Last time the share price was this low was spring 1993. 30 years ago.
Management still delighted and pleased by this.
Must be some of the Institutional Investors pushing for a shake up as the way the current team appear to be proudly overseeing this shytshow is contemptuous towards shareholders who are watching their investment disappear and line the pockets of management.
PUBLISH YOUR MANAGMENT TARGETS EACH YEAR.
TELL US SPECIFIC FIGURES IN UPDATES.
REJECT YOUR BONUSES IN LIGHT OF THE CURRENT SHARE PRICE AND MARKET PERCEPTION.
Ploughing into the 130s.
Balance Sheet net asset position was >£600m at 30 June 2022. The current share price for the collective company is fast spiralling to £300m.
If this was a football team the Management would have been relieved of their duties well before now. Value destructive does not even begin to sum up their perception.
They are a disgrace.
Company has previously said that management expectations should broadly be in line with analyst thought, but flatly refuse to publish that.
Analyst views for current year are 35-40p EPS. With up to half that as divi. I think realistically 35p EPS and 17p dividend might be realistic. So on this farce of a valuation its 3.5x current PE and over 10% divi yeild. Also trading at 40% discount to net assets.
They've consistently said they already have very prudent provisioning in place. You'd have to think at some point this becomes a serious takeover target for someone.
Not sure who this new brokerage is who've never covered PFG before but instantly came out after TU to note its marked as under perform as they'll suffer losses on book, was almost as if they had it pre written and didn't even read the TU which addressed their risk focus.
Barclays have market target price down from 370p to 310p due to macro conditions.... But... That's still 120% upside on current price.
I stills say management need a shake up. That alone would give SP a shot in the arm. I have zero respect for them as things stand.
Regarding "The Group remains on track to meet market expectations"
What are these market expectations ? In the absence of any company guidance how did the market arrive at these expectations ?
Anybody know of any links to broker research ?
Theborn
Vanquish bank offering 4.25% on a one year bond… they must be confident they can use those funds within the group
Thanks bigpunt Will do :-)
Thanks Theborn
I’m clear now and see the benefit of PRA approval on profits which all makes perfect sense
Must confess I’m thinking of adding at these levels as unless business going bust must be massively undervalued
Barrie
PRA approval for using deposit funds throughout the group is not business critical at all but a useful nice-to-have that could further decrease PFG's cost of capital.
As PFG has a banking license it can raise deposit funds from retail customers and use those retail deposits to lend out within that same entity (I believe the credit card lending business). PFG are requesting PRA allow them to use those deposit funds across the broader group -i.e. these could then be used to fund the some of the car finance business.
Overall assumption being that the rates they pay to savers depositing funds with PFG is less than the interest they'd pay to raise those funds externally.
As I say, in no way business critical but has potential to increase profit margins. They even refer to it on their Focus for 2022: https://www.providentfinancial.com/who-we-are/strategy/
So to simply omit a progress update on this piece which was mention in the July H1 TU further hardens my view than MLM and the senior management at PFG feel they can treat shareholder with contempt and assume they are idiots and won't ask questions.
"and why the board are not over egging the future"
Big Punt … thank you for the insight of a PLC executive but my point was the perceived market risk in this sector not the antics of its executives.
Barrie, I suggest you open up the interim results statement, ctrl + f and type in "PRA" and read every paragraph with "PRA" in it
Pooks let me give you a reality check on being a PLC exec.
Management are not incentivised to outperform the market expectations. In fact, to keep them on their lucrative remuneration packages, they just need to knock down consensus without it becoming a profit warning, and hit that revised consensus figure
We saw Morses Club's former Chief Exec sounding like a used car salesman when talking about their prospects, and look what happened to them
There are a lot of shares out there that could plausibly be valued at 2x current share price. Difference with PFG is that they are generating a lot of cash and returning a lot of it to shareholders
Hi Pooks
Good analysis but shares down another 5 so I’m wondering when does the huge discount to NAV hit some sort of floor.
Still feel I need to understand if PRA decision could shut down company if unfavourable so please anyone out there who understands what exactly the company is awaiting clarification from them about and can let me know?
It was a conspicuous omission from “news” published by company along with a lack of numbers because it’s apparent MLM isn’t a numbers guy??
So much so I’m even left wondering what is the profit figure “market expectation” is referring to??
Does anyone know what full year will be if we stay on current trajectory? £100m ??
I think most small investors are missing the point …PF are definitely in a unloved sector at the moment but on there side No shortage of potential new customers… BUT and it’s a big BUT how many are likely to default in what are going to be very difficult and challenging times for the average consumer…This is the great unknown and precisely why the markets are nervous about PF and why the board are not over egging the future.
BOD need a rocket up their a***.
A sort of alternative Yazz song seems to describe this share??
Seriously it’s pushing towards the 140s now so I’m wondering if anyone can concisely and logically explain what PRA decision means for the company since it’s the one obvious omission from the recent statement?
If it doesn’t happen can the company continue to transact business and if not should it just be broken up and money fo to shareholders in which case the notion of NAV goes out window as tgere will be redundancy. Severance, holiday pay etc to fund
See some relatively large off book buys coming in. 200,000 shares just now at 1.58.
Very often the first market reaction is exactly the opposite one than I expect (reaction is very often non rational)
-> would not be wondering seeing the price recovery soon...