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PAG PARAGON This from Broker Berenberg this morning... Paragon: According to research by specialist mortgage broker Mortgages for Business, more than 55% of landlords are looking to increase their property portfolios and over 40% plan to remortgage over the next six months. The buy-to-let sector continues to see a modest recovery stemming from attractive yields (6-7%) available on residential property investments as tenant demand surges due to continued limited access to credit for first-time buyers. This will benefit Paragon, which is looking to take advantage of this trend by more than doubling new lending to c.£400m in 2013. The stock has re-rated sharply in last six months (up c.60%) and now trades on a 2013 P/TBV of 0.9x for an RoTE of 9%.
Paragon Group of Companies: UBS raises target price from 265p to 278p and downgrades from buy to neutral.
PAG PARAGON Breakout confirmed on the 48 hour TA rule on this one. Excelent new 52 week high... http://uk.advfn.com/p.php?pid=staticchart&s=L%5EPAG&p=6&t=47
Heading higher was Paragon, the buy-to-let lender. It added 1.8p to 242p after it confirmed reports it was seeking a banking licence with the possible purchase of Hampshire Trust, a private bank which offers loans and development finance. Espirito Santo said: For Paragon the attraction is that the banking licence offers deposit accounts and savings bonds which Paragon could use as a source of retail funding. This would diversify Paragon's sources of funding and enable it to meet the demand it is experiencing from retail borrowers it has acquired through its recent portfolio acquisitions once they have repaid their loans – an opportunity management said they are currently having to turn down. Although this is still early stages, it does highlight managements proactive approach to increasing return on equity within the business and adds to our belief that there is significant value within the group.
Paragon: Acquisition of Hampshire Trust Buy-to-let mortgage specialist Paragon Group [LON:PAG] has confirmed that it is in the early stages of considering the acquisition of Hampshire Trust Plc., a subsidiary of National Counties Building Society. The announcement comes after reports in the weekend press. Analyst Peter Lenardos at RBC Capital commented: “We believe this would diversify Paragon's sources of funding and make it less reliant on the wholesale funding markets. “However, we note that there would be a duration mismatch as short-term deposits are used to fund longer-term mortgages. “Until Paragon provides further details on the proposed transaction, there is no impact to our forecasts or price target.” RBC Capital currently have a ‘sector perform’ rating on the stock and a price target of 260 pence. Broker Forecasts three month consensus data highlights that 82 per cent of brokers have a buy recommendation on the stock, 9 per cent are recommending selling shares in Paragon with the remainder of brokers maintaining a neutral rating on the shares. At 2:44pm: Paragon Group of Companies share price was +2.65 pence at 242.85 pence.
Mortgage provider Paragon Group of Companies backed up press speculation on Monday morning by confirming that it is thinking about acquiring small private bank Hampshire Trust. The Sunday Times reported yesterday that the buy-to-let lender was in discussions with Hampshire Trust over a deal that would grant it a banking licence for the first time. This would allow it to start offering savings accounts for its customers. In a statement, the company said: "The Paragon Group of Companies PLC notes the recent press speculation and confirms that it is in the early stages of considering the acquisition of Hampshire Trust Plc, a wholly owned subsidiary of National Counties Building Society. "There is no certainty that a transaction will be concluded. Paragon will update the market when it is appropriate to do so."
Could be a game changer for PAG. http://www.citywire.co.uk/money/small-bank-could-be-big-deal-for-buy-to-let-lender-paragon/a639334?ref=citywire-money-latest-news-list
Canaccord Genuity maintained its "buy" recommendation on mortgage lender Paragon (PAG) with an unchanged target price of 313p. The broker is impressed with the fact that the company has exceeded its pre-tax profits, earnings per share and NAV per share forecasts and believes the company's prospects are bright. The broker also notes that the firm increased its dividend by 50% over the year to 6p and believes this is indicative of the board's confidence in the business.
Paragon Group of Companies: UBS raises target price from 262p to 265p, buy recommendation reiterated. Jefferies raises target price from 260p to 290p, buy rating remains unchanged. RBC Capital Markets raises target price from 240p to 260p and dongrades to neutral.
Paragon Mortgages and Mortgage Trust, its buy-to-let origination brands, now fully re-established following the recommencement of new lending in 2010, advanced new loans of £184.3m (2011: £127.0m). In addition, a strong pipeline of business was in place at the end of the year, which, combined with the 125% increase in warehouse capacity (a short-term revolving credit facility extended by a financial institution to a mortgage loan originator for the funding of mortgage loans), illustrates its belief that lending volumes will increase in the new financial year. It has proposed a final dividend of 4.50p per share (2011: 2.65p) which, when added to the interim dividend of 1.50p, gives a total dividend of 6.00p per share for the year (2011: 4.00p), an increase of 50%. It intends to pursue a progressive dividend policy so that, by 2016 and thereafter, dividend cover will be maintained in the range 3.0 to 3.5 times.
The Paragon Group produced record profits for the full year, enabling a 50 per cent hike in its dividend and the promise of a progressive payout policy. For the year ended September 30th, this specialist buy-to-let and consumer finance group saw total operating income of £170.2m (2011: £150.9m), producing pre-tax profits of £95.5m (£80.8m). Earnings per share were 24.2p (2011: 20.2p), an increase of 19.8% from last year reflecting the improved profits earned by the group and a reduction in the tax rate. The increase in profit has also improved Paragon's return on equity to 9.3% from 8.3% for the previous year. The company said that its strategic focus has remained unchanged; to generate growth through its buy-to-let origination franchise, through investment in loan portfolios and by exploiting new opportunities; and to maintain close management of the existing loan portfolio, which performed well in the year. Idem Capital, its dedicated investment subsidiary, successfully built on the five portfolios purchased in prior years with further investments during the financial year totalling £115.4m.
In a sign of the times, mortgage provider the Paragon Group of Companies has seen its warehouse loan facility with Australian finance house Macquarie Bank renewed at a higher level. The company, which serves the buy-to-let market in Britain, said the facility has been increased from £200m to £250m. Interest will be charged on the amount drawn at an unchanged rate of three-month London Interbank Offered Rate (LIBOR) plus 2.875 percentage points. Paragon uses warehouse facilities to originate and aggregate mortgage loans, where they are held for a limited period prior to long-term funding in the mortgage backed securitisation markets. Paragon recently completed its latest securitisation, PM17, amounting to £200m. The company more or less went into hibernation during the credit crunch in the second half of the last decade, as the wholesale loan markets dried up, but has been building up steam in recent years, as landlords seek to capitalise on Britain's high house prices, which make it difficult for first-time buyers to get mortgages. "This extension and increase in the loan facility means that the total warehouse capacity within the group is now £450m and supports our growth plans in the buy-to-let market, where we see continued landlord confidence in the sector, supported by strong tenant demand," said Nigel Terrington, Chief Executive of Paragon.
Paragon Group of Companies: UBS raises target from 254p to 262p, buy rating kept.
Paragon, the FTSE-250 buy-to-let mortgage specialist, has acquired further unsecured consumer loans through its Idem Capital Securities subsidiary from the Royal Bank of Scotland under the terms of a forward flow agreement. Paragon is financing the purchase from its existing cash reserves and which represents the value at which the acquired loans will be taken on to its balances sheet, namely £25,000. The investment is expected to be earnings enhancing in the current financial year. The firm previous acquired a portflio of loans from RBS for £43.2m, along with other smaller purchases. The group said further loans may be taken on.
I think we have some good news in the very near future. This share is well undervalued
Here's the link: http://www.dailymail.co.uk/money/investing/article-2210568/MIDAS-SHARE-TIPS-Profit-rental-boom-buying-Paragon-Group.html good coverage / profile
Midas page 77...half a page about this comp...
PARAGON BUYING UP CREDIT CARD DEBT Paragon, the specialist buy-to-let mortgage lender, said one of its companies had snapped up a bundle of credit card debt from MBNA Europe Bank. The firm is finding fertile hunting ground in banks trying to clear debt off their balance sheets. The purchase of closed UK consumer credit card debt is expected to be worth £16.2m and will be funded from Paragon's case reserves. The acquisition is expected to be earnings enhancing to the company in the current financial year. This acquisition follows a similar deal by Idem, one of Paragon's companies, to buy debt from MBNA in December last year for £55.7m. "This is the eighth transaction by Idem Capital and brings the total investment in the current financial year up to an expected £115.7 million, resulting in the division becoming an increasingly large part of the Group's activities," said Paragon's Chief Executive Nigel Terrington. "Idem Capital was the UK's second largest buyer of consumer loan portfolios in 2011 and we continue to see attractive portfolio acquisition opportunities with the banking and financial sectors increasingly seeking to de-leverage their balance sheets." 27 September 2012 Peel Hunt retains its BUY recommendation for Paragon Group with a target price of 288p. P.S. Here's some links about SCLP, one of the hottest stocks at the moment: http://www.euroinvestor.com/community/discussionthread.aspx?iid=2467508&threadid=256596&mode=2 http://www.euroinvestor.com/community/discussionthread.aspx?iid=2467508&threadid=255276&mode=2 http://www.euroinvestor.com/community/discussionthread.aspx?iid=2467508&threadid=257550&mode=2
Paragon has shown remarkable resilience considering that at one point it was reduced to collecting money on existing loans and not much else. True, the dividend is a shadow of its former self - it nudged 29p per share in 2006-07 - but Paragon never axed the payout. Besides, buying the shares is about staying in for the long haul as the price catches up with underlying net asset value (currently it's 30 per cent below) and hoping for a kicker if and when the eurozone's debt crisis eases.
And Paragon has always been a prudent lender. For the most part, it only deals with full-time landlords - typically with a dozen or more properties, and loan-to-value ratios are relatively modest at around 80 per cent of each property. Consequently, bad debts remain far below the industry average at just 0.54 per cent of the loan book. And, even where landlords encounter problems, Paragon adopts a hands-on approach by stepping in to secure the rental income required to meet the mortgage payments. If the landlord is unable to continue then a receiver is appointed, and last year there were 1,483 repossessions, of which 93.9 per cent were let out, with rental income more than meeting mortgage payments. Of course, all of this could grind to a halt if financial markets suffer another seizure, which is possible given the state of the eurozone, thus freezing up wholesale money markets again. And at some point, although later rather than sooner, mortgage rates will have to rise from current lows, which could put pressure on some landlords.
However, most revenue still comes from providing buy-to-let mortgages, and there are signs of improvement in that market. Not only has Paragon established a warehouse loan facility from which it can draw funds to lend out, but in November it also completed its first securitisation since the credit crunch, raising £164m at 2.75 percentage points over Libor. What this entails is bundling a package of mortgages and using them as collateral to back securities, whose coupon is lower than the interest rate on the mortgages. Consequently, the mortgages disappear from the balance sheet and the money from the securities reloads the warehouse facility. And plans are well advanced to extend and increase this from the latest £200m facility secured with Macquarie Bank. All told, Paragon now has issued over £8bn of asset-backed securities.
Paragon is not back to its old self. How can it be when the UK's economy is barely even spluttering. But while it may not be business as usual, Paragon is still set to make record profits in the year to the end of September, thanks in large part to diversifying its revenue stream. Before the credit crunch, Paragon operated a consumer lending business and offered buy-to-let mortgages. Both of these virtually stopped when access to affordable wholesale funding all but dried up (Paragon has no retail deposits to tap). In response, its bosses started to source alternative revenues and these are providing much of the current momentum. Now Paragon derives an increasing chunk of its profits from buying and running off portfolios of unsecured loans from high street banks anxious to shrink their activities. Sure, unsecured loans come with risks, but Paragon pays far less than face value for them. Since 2009 it has bought approaching £100m-worth of loans, and they are performing well. Paragon also put to good use its expertise in managing loans by establishing Moorgate Loan Servicing to manage loans for other lenders. This, too, has worked out well. By the end of last year it was servicing nearly 50,000 third-party accounts. And a further 33,000 are planned for inclusion by September this year.
"During the period, the group has continued to build on the excellent progress made during the first half of the financial year, continuing the prudent management of the existing and acquired books whilst seeking growth through new loan originations and through portfolio acquisitions, which the group will continue to pursue this strategy," the firm said. "Negotiations are progressing well for an extension to the group's warehouse facility at the end of the current commitment period in December 2012 and an increase in its warehouse funding capacity to facilitate further development of the buy-to-let business. Further information on the conclusion of these negotiations should be available in due cours
Buy-to-let mortgage specialist Paragon Group has delivered strong financial performance, in line with management expectations, during the period from October 1st 2011 to June 30th 2012. Operating profits came in at £68.9m compared to £58.9m during the same nine month period the previous year, primarily as a result of income generated from the group's acquired portfolios of consumer loans. Pre-tax profits, inclusive of a credit of £0.6m for fair value hedging items, were £69.5m for the period. The portfolio has continued to perform well, generating strong profits and cash flows, with redemption remaining low. At June 30th, arrears of three months or more on the buy-to-let portfolio, including acquired loans and receivership cases, were 54bp (55bp at 31 March 2012), while free cash balances were £126.9m (£104.9m at 31 March 2012). During the quarter, £45.1m of new buy-to-let loans were advanced and a further £2.1m was advanced by way of further advances to existing borrowers In the year to date advances total £136.4m and the pipeline of new business at June 30th was £121.3m.
Shore Capital maintained its "buy" rating for Paragon Group (PAG), impressed with the mortgage provider's improved revenue mix. The broker said that the firm's acquisition of loan portfolios is helping drive earnings growth, noting that the company had a strong pipeline of targets. Shore increased its earnings forecast by 10% for the 2012 financial year to 23.4p, putting the shares on a prospective multiple of 7.2 times. The broker added that the dividend could be increased to between 9p and 10p, giving a yield of between 5.3% and 5.9%.