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Scoobydoo321 - It's certainly on a VERY undemanding P/E for a company that's consistently profitable, with a progressive dividend policy - and a decent yield.
That said, market sentiment for this sector has definitely deteriorated in recent months (check out RFX too). So even at the current SP level, I guess things could get a bit worse before they get better. But I'm not too worried about holding at this level.
I had hoped to recoup my entire outlay this month, in return for selling 75% of the shares I bought in January at 319p (day of TU). But they've not hit my limit sell price yet. H&T's recent acquisition RNS did little to help! So it looks like I'll just have to be slightly more patient, consoling myself with a higher than anticipated dividend payout in the meantime.
I'm personally betting that the bad news is out of the way now. Sellers who wanted out are out.
Also, The PE is c6 - was thinking that PE firms might sniff around at these prices. HAT is in a market dominant position,. After all PE = 6 means that in 6 years time, they have paid off their investment.
Additionally, I reckon that a few funds may buy more at these prices.
Hardboy - you're welcome! Not sure whether you're anticipating a big move up or down?
Personally, I'd only be expecting a big move if there's further bad news (i.e. an extension of retail softness into January & February). They said January had got off to a strong start, so this seems a little unlikely. But December's downturn also came out of the blue (to them), so you never know.
Assuming everything's panning out as highlighted in 23rd January's RNS, I suspect any SP reaction would be fairly muted. But H&T's certainly been harder to call since November, so anything's possible.....
Thank you both for your replies.
As always I will DMOR & draw my own conclusions.
What I do think, though for H&T is their results in a couple of weeks will likely trigger a big move - possibly greater than the results merit. Watching with interest.
Nothing pompous in that diatribe
He says beware....so do I...... and don't forget the most golden of all the rules
DYOR & stay focused folks
Hardboy - I'd be wary about engaging with TopCatz if I were you.
I can only guess from your reply roughly what he posted, as I have him on filter. But he & I have never seen eye to eye on another share, where he predicted great things, whilst the share price of the company in question (TEK) continued to plummet. And so far, it's regained only a small fraction of the losses compared to the price level he kept tipping it at.
Since then, he's tracked me down on various other boards, posting similar nonsense, which is why I eventually decided to filter him.
Given your reply, he seems to be suggesting a Labour government would do for H&T's prospects. If so, I'd simply respond with the following:
a) an election is probably still the best part of a year away
b) Assuming Labour gets in, don't you think they might have slightly bigger fish to fry in their first term, rather than going after pawnbrokers? Quite apart from anything else, they'd risk being accused of attacking a regulated industry that's serving a recognised consumer need & is generally highly regarded by the very people using its services (check out H&T's Trustpilot reviews). Such actions could easily lead to them being accused of inadvertently encouraging the re-emergence of more unregulated loan sharks.
Anyhow, up to you, but I personally wouldn't keep engaging with TopCatz. No doubt he'll respond to this post too, despite knowing I no longer read any of his comments (even though he seems to think I still waste time on them).
Yes of course Hardboy, I get that, but a Labour government, and I can't see any other outcome personally, carries the additional threat of legislation that's likely to the detriment of this sort of business.
Obviously not going to happen overnight but it will change the colour of the landscape when risk factoring and valuating imho.
Election is likely to be a way off for now. Late Summer/Autumn ? Plenty of time still but worth bearing in mind.
GL
I'm not sure an election will have much effect on H&T's performance. The economy will still be in a mess, people will still be struggling with their finances. Ideal situation for Pawnbrokers to flourish.
Fast-forwarding 12 months - is that today's price level will look like a pretty decent time to have bought in/added.
You mean sold surely. There's an election coming up between now and next year. In fact you told everyone that you would be 'well out' by then when ramping on another bb.
The Truth, the Truth and nothing 'like' the truth.
Garbage
Hardboy - I wouldn't pay too much attention to Gary Greenwood (or any other analyst come to that).
In Feb 2023, he was predicting for FY 2023: "£32.6m profits, 57.9p earnings and a 23.0p per share dividend".
Now it's "£26.6m, with earnings of 48.4p and a dividend of 17.0p per share".
Most nomads & house brokers simply blow with the wind & are no better at foreseeing bumps along the road than you or I.
In fact they're probably worse, because as paid advisers they're prone to positive bias. And when events change, they just change their mind.
You're far better off going with your own research & gut instinct IMHO. And my instinct - fast-forwarding 12 months - is that today's price level will look like a pretty decent time to have bought in/added. I base that largely on fundamentals as well as the duration & scale of past H&T share price corrections.
Article from Master Investor on H&T today. I'm a bit more reassured after reading this. Amy even add a small amount before the finals.
"H&T Group (LON:HAT) – £11.3m Cash Buy And Additional Funding
My long-term favourite pawnbroking group yesterday announced £25m of additional financing from Pricoa Private Capital, to be used to support the future growth of the business.
The UK’s largest pawnbroking operation also made an £11.3m cash acquisition of Maxcroft, the Gants Hill, Ilford-based pawnbroker.
It has a £6.1m pledge book, with an average loan of £4,063, almost ten times larger than that of H&T’s £423 average loan.
CEO Chris Gillespie, H&T chief executive said:
“We are very pleased to be able to announce these two transactions, both of which underline the Group’s focus on growing and broadening its core pawnbroking business and investment in the store estate.
We are also delighted to have further diversified and enhanced the Group’s funding arrangements through the relationship with Pricoa.
We look forward to updating the market further on the 12th March, when we announce our results for the year ended 31st December 2023.”
Analyst Gary Greenwood at Shore Capital Markets considers the Maxcroft deal to be moderately earnings accretive.
His estimates for the year to end-December last, are for adjusted pre-tax profits to have risen to £26.6m (£19.0m), with earnings of 48.4p (37.2p) easily covering a dividend of 17.0p (15.0p) per share.
For the current year underway he goes for £33.5m profits, 57.4p earnings and a 19.0p dividend per share.
I still rate very highly the prospects for this £165m-capitalised business – as far as I can see its shares, which touched 389p yesterday, are a real bargain at last night’s closing price of just 370p.
Having broken through my 500p Target Price in late October last year, before easing back significantly, I now feel that the shares are ready for another upward climb.
(Profile 06.07.22 @ 332.5p set a Target Price of 400p*)
(Profile 30.01.23 @ 429p set a Target Price of 500p*) "
Thanks hardboy
Good luck to you too. And indeed to all H&T holders.
All good positive points, Lord, my first purchase in 2020 (I had been in before, but think I sold at the start of covid) was at 235, and have added several times since, because I was increasingly convinced by the outlook and the capability of the BOD. This recent deal has just got me slightly concerned; but I will not do anything till the results, and I will read them with a lot of care. Good luck.
The current storm clouds here remind me of the period when H&T was under FCA investigation for its HCSTC loans. All was doom & gloom then, with the share price feeling like it was on a permanent downtrend.
I took the view/gamble that any fine (& reputational damage) was likely to be fairly insignificant & short-lived. So I added several times at prices between £3 & just under £2, as the share price continued to nosedive. Not only have I benefitted from the dividends since, I've also made a half-decent return on capital - even allowing for recent corrections.
I'll be doing the same again this time if March's Preliminary Results cause any further significant correction (unless there are any further curved balls of course).
So - reasons to be cheerful?
Well, it's perhaps worth reminding ourselves that H&T:
1) Expects to report record profits in 2023
2) Trades on an increasingly undemanding P/E (currently around 9, dropping to around 6, assuming annual PBT of £27m-£30m)
3) Pays a decent yield with a progressive dividend policy
Change in sector sentiment is very much at play here currently, with Ramsdens also suffering a significant share price drop in recent months. I suspect both will prove fairly short-lived. P/E ratios that low for consistently profitable companies paying a decent yield rarely last.
Hardboy - odd, as SP opened slightly up this morning before dropping at around 9.30am.
Hard to know if the fall's down to a new bit of broker research, a significant fund manager sale or just a delayed reaction to yesterday's RNS. There's certainly been more active trading today than normal, but values generally look small. The highest recorded trade I can see so far was for £55,645 at 9.30am (i.e. around the time the price fell significantly): www.londonstockexchange.com/stock/HAT/h-t-group-plc/trade-recap
Perversely, it could be that investors are slightly spooked by the news of yet another round of financing. Which I actually view as a positive. Amongst other things, it suggests the pledge book is continuing to grow and that H&T is therefore requiring ever more capital to lend out. Since it lends at far higher interest rates than it borrows, a growing pledge book should correlate - at least in part - to growing profit.
So in short, I'm not unduly bothered at this stage. Though I do still think yesterday's acquisition announcement was questionable to say the least. And that presentationally, the piecemeal funding increases have - perhaps unjustly - dented sentiment. As you say, providing March's update doesn't show further deterioration in H&T's retail sales and the outlook sounds reasonably positive, confidence should start to return.
I think today's market reaction is more in line with ours yesterday. I really hope the finals next month inject some confidence back into the share.
Hardboy - according to Thisismoney, H&T HAVEN'T acquired the Ilford property freehold:
"H&T will enter into a lease in respect of the store."
www.thisismoney.co.uk/money/markets/article-13108401/Pawnbroker-H-T-Group-acquires-pledge-book-Essex-based-Maxcroft.html
In terms of the new financing, according to UK Investor Magazine: "This takes total funding to £85m. Some of the new capital will be used to pay down the revolving capital facility (RCF) with Lloyds".
That Lloyds RCF was priced at 2.4 to 3.3 percentage points above the sterling overnight interbank average rate. Sterling's overnight rate currently stands at 5.19%, so I can't see them saving a great deal there.
It's all starting to look a bit more haphazard to me. Funding has been increased multiple times in recent months, some of which now looks like it's going to be paid down in favour of using yet another new lender. Fair enough if it saves them money overall I guess. But why keep raising finance piecemeal? To me, it's beginning to come across as a bit more tactical than strategic - more whimsical, less planned.
Personally I'd have preferred them to raise any additional capital by offering fixed rate preference shares to existing investors. I, for one, would have happily subscribed to H&T preference shares offering, say, a 7.5% annual dividend, redeemable at par after 5 years. But I suppose this might be a less predictable/more costly & cumbersome way for H&T to raise the capital it feels it currently needs.
I agree, lord, skipping through on first reading it seemed the new loan is a high fixed rate, and it's double what they need in the short term for the acquisition. It was only last July they increased their overdraught limit by £15m. I can only hope they know what they are doing and the investments they are making over the coming month will yield much better returns than the cost of borrowing.
And again, what other assets are being purchased apart from the pledge book? There is an awful lot of cost in the extra bit, what is the value? Maybe the site?
Like you I am reassured that the market reaction so far is positive.
Whilst I normally have total confidence in H&T's management, the £11.3m acquisition of selected Maxcroft assets looks dubious & EXTREMELY overpriced to me.
As far as I can see, Maxcroft only has one outlet. Google it. It looks like a small converted house in a largely residential, non-retail area. And the main acquisition is their pledge book, valued at "just" £6.1m. Plus they'll assume the cost of Maxcroft's five (yes, only five) employees.
I get that Maxcroft's customer profile offers diversification, with a far higher pledge loan mean value. I also realise its employees may have some expertise in targeting a different customer demographic. But £11.3m? Really?
That said, so far the market has reacted positively to this morning's RNS, including news of an additional £25m financing at relatively high fixed interest rates.
If the share price nudges slightly further up, I'll be banking profits on the additional shares I bought at 319p when their TU was first released on 23 January. But that would still leave me with a sizeable holding here, as I remain confident in H&T's 1-2 year prospects. Just don't want to be over-committed to any one company.
Change of tune.
Loads of it has been ramping this and telling everyone £5 was imminent all over. The imminent minimum wage increase and retail backdrop were already known. Maybe he was getting out whilst you were getting in.
With sentiment on the wane here those results in March better be good. If they're average or worse it's only going one way.
Watching with interest. Can't short on a spread bet at the moment (results imminent) but otherwise I'd take a small punt.
Chances are it's going South
Pedro61 - Last year I'd have said the same.
But since then - with an imminent Living Wage rise & a sticky retail backdrop - I'm not sure 500p+ is achievable this year.
That said, I fully expect the share price to rise above 400p at some stage before 2024's out.
I can see 500p and over this year.Very undervalued on every metric,in my opinion
Best of luck Scored. Lots of value out there. This year rotation will be FTSE to small caps as they interest rates hopefully kick into reverse IMHO
Topcatz all the best with your trading i will look at your shares you trade on lse .SEE if i like
Just one sniff of an election and this will lose 50 to a 100 pips overnight Scored. If it steams through 390s into the 400s then not for shorting but if it's struggling I'd be tempted.
Anyhows GL with it if you're here scored. I remember you from the STX days. You're a good guy