Member Info for alwayswrong

BigB...thanks for your comments , which as always, I found to be insightfully persuasive and well informed..they have reassured me and I will put them into the mix ...at this stage I will probably hold...your previous comments about the absence of any blatant alternatives remain valid...

Thunder.. Thanks for your comments..could you please let me know why you think the pilot lending point is void...is there a link you can signpost me to, which validates this..
BigB... Well I don't think the results are dire..I just don't think they are good...mainly because of the significant uplift in provisions for complaints like I have said , and the possible external ramifications of this...
My comments are, as I say, just first impressions and being a qualified accountant I do tend to take a prudent view about the whole report in its entirety, rather than get carried away with the headlines..although I don't ignore the headlines altogether , and the increased provision for complaints resulted in the headline 'adjusted profit after tax' being circa £5 million worse than I had expected...

Once I have had the time to read and digest the report in more detail, I will then make a decision on whether or not to sell...until then I will continue to hold so you won't be saying goodbye just yet... I would also like to hear your views on the remarks made by the B of D in the risks section regarding the major shareholder..
I do take your point regarding the active investor , which I had forgotten about and your upbeat assessment of the results does cause me to pause and reflect on my own assessment....it has to be said though that even though the markets responded positively (if not overwhelmingly) to the results initially, that optimism faded as the day wore on...
Let's see what happens tomorrow..

Thunder....you want to use Pilot Lending to ramp up the Loan Book prior to flotation to attract a higher initial share offer price...
Look up Amigo pilot lending on Google...

I have read all your comments , supported by initial market reactions...however, initial market reactions do often reverse, as the underlying contents of the report sink in, so don't be surprised if there is a large sell off, maybe in the last hour...if you note , all of the major transactions have been sells once 69/70 pence is reached..
My caution remains... Of the £700 million loan book there will still be a residual amount of the £99 million of 'pilot' lending conducted just before the flotation...pilot lending to me and you is lending to people who didn't meet the usual criteria..in other words and in probably the majority of cases..it meant that money was leant to people who couldn't afford to pay it back..Amigo relied on chasing the guarantors when the borrowers defaulted on the repayments..
Updated rulings are that if money was leant to somebody who couldn't afford to pay it back , then guarantors escape their liability for making up the repayments , furthermore, the borrower can reclaim all interest paid, plus 8% simple interest... On a worst case basis and if everyone fitting into this category complains then the total refunds could be (I estimate) around £40 million....Amigo have so far made a provision of £10 million ...up from £2 million only last quarter...their view is that this is a very conservative o
provision, time will tell... Personally I don't think this story isn
is over , not to mention the bad publicity fall out from it all, impact on reputation and subsequent risks of new borrowers avoiding Amigo and choosing another lender.....they currently hold an 85% market share of the guarantor loan market , and have the most to lose...they recognise this and are moving into less risky borrowing which of course comes with lower margins...
Check the comments from the BOD regarding risks relating to the major shareholder using their voting power to act in a way which isn't in the minority shareholders interests...if they used this voting power to say, cancel the dividend , the share price would drop like a stone...not now of course..but later on at some point in the future .
For me, the super profits phase of guarantor lending for Amigo are coming to a close...Amigo will still make profits, once the compensation from all complaints unwind , but not at the same levels as previously enjoyed...
My view is that taking all risks into account, the gap between the higher fundamental value of the share price , compared to the lower actual share price has now reduced , and potentially significantly...
All this is my own opinion and not intended to encourage you to either buy or sell..please DYOR..
Yes of course I could be , and indeed very much hope I am wrong. ...I am an investor too...

First impressions are not good...several elephants in the room...
1..Massive increase in provisions for complaints..up from £2 million to £7.8 million and profit after tax only rescued by reduced tax provision of £2.9 million, otherwise the profit after tax would be £2.9 million worse. Further complaints to come ..not good .
2..Statement re involvement of major shareholder who views differ from BOD and may disadvantage minority shareholders (us). More conspiracy theories to follow.
3..Statement on regulatory update was wrong and misleading...huge risk going forward ..
4.interim dividend increased to sweeten the bitter pill
Let's see how markets react..

Well it won't be long before we find out...a cautious welcome to the regulatory announcement. ?

Excellent point Bee re escaping punitive action...that will be a massive boost going forward if it materialises.. Is that the end of the whole regulatory reviews do you know, or are there other reviews going on the background..?

I thought it was a low key and rather subdued announcement..

Yes, all you say makes good sense .. I am eagerly awaiting the release of the half year results so that I can scrutinise them and make a decision then... We have had no update or information since August and the release to be made on Thursday will be able to take into accounts all trends and events 2 months into the THIRD quarter , so we should be given a more reliable picture of the overall situation as it now stands..
Some of your conspiracy theories of what is taking place in the background at this time, may well be true but it's also likely that we will never know for sure..
I can see why JB isn't on the board...with a 61% holding he can dictate events in the background without legal accountability ...particularly if he can unilaterally decide whether or not to reappoint directors ??
I think we have exhausted all possible agendas and potential outcomes and we now just have to wait until Thursday...I think though it's fair to say that you are more optimistic about the declared half year position than I am...I hope you are right..

Yes it's difficult to see why those events, however unfortunate , could bring about such a huge drop in the share price. .The 50% drop on the 27/8 August was when the share came onto my radar because all other things remaining equal, the market reaction was surely overdone based on the 1st quarter results, but the slant on the figures within the commentary, combined with a declaration of the deteriorating outlook, I feel , caused the level of pessimism (whether orchestrated or not ) that occurred at the time
I bought at 74.5 pence expecting a bounce which didn't come...a ripple upwards to 80 pence brought me some optimism but subsequent drops to 56 pence made me desspondent, causing me ro conclude that there were other factors in play. .The lack of liquidity combined with selling dominance was sufficient to keep the price falling...this does seem to have gone into reverse now so will wait until Thursday results. Your speculation regarding behind the scenes events might well be true but I guess we will never find out .
I am not sure JB will want to join the board himself, owning 61% of the shares and voting power will give him all the leverage he needs to get his own way which includes deciding on the re-election of directors, but at the same time without being exposed to any legal accountability...
I am just hoping that all these factors will provide us with an escape route and an exit price of £1.10 would give me my target 50% gain, but under the circumstances with this share, I may run for the door if the price reaches £1.00, although if in the meantime a take over offer of more than these amounts materialise then I will joyfully take it...do you have a target price which will make you exit, bearing in mind your high numbers of shares held...?

Yes I do BB and it was this post which alerted me to that possible agenda, a theory which seemed to become more plausible with each sell off in the final twenty minutes of daily trading, causing a steady downward trend from 80p to 56p in just a few weeks...at one stage , I myself thought about liquidating , thinking there was some leaked story yet to emerge which would cause the share price to crash after the release of the half year results. . The last three days, however, have ended the day in positive territory ...hardly a confirmatory trend reversal but bringing an as yet brief respite of the previous steady declines....I think we just all have to wait until Thursday now to see what the half year results bring ..

Thanks BB for a comprehensive reply to all of my points and I fully understood all of it and concur consequently with the vast majority of it...
The only part that I have slight problem with is the price we are likely to be offered for our shares.. 39% of the shares or 185 million of them are held by minority parties (including ourselves) and a price of £2 per share would cost him £370 million to acquire these ....where would he find the resources to do that ..? His £1 billion wealth was mainly paper wealth based on the flotation price and we have already established that he has lost £600 million plus (again on paper) of that ...based on the current share price of 60 pence , I could see him being successful with an offer price of 90 pence per share which is still a 50% premium of where we are now. If the half year results aren't as bad as we fear and the share price leaps, then maybe an offer price could be increased to between maybe £1.00 to £1.20 max..due to the hinderance of likely future regulation...unless as you say, the company was taken offshore with activities continuing largely unimpeded..
Would be good to hear other people's perspectives, I am not sure we can take this any further now until the half year accounts along with outlook and future dividend intentions are published...Being a qualified accountant I am looking forward to reading these accounts and in particular establishing the positive or negative nature of the spin accompanying the figures, because this will be a major determinant of the direction of the share price following their release ..lots of different agendas on the slant that will be made .
I agree, we sit tight and hold or even as you say add more, based on the current 60 pence share price ..but as always DYOR..

Thanks BB for your various scenarios...there are a couple of areas where I am unclear so perhaps you could help clarify them .
1..you refer to the worse case scenario, where we would be bought out and the company administered offshore to the detriment of existing borrowers....where would that leave us. ?? forcibly bought out ? and if so at what region of individual share price. ?
2..What do you think is the motivation of the new entrant and how do you think that will affect us ?
3..What do you think the chances are of the status quo remaining and the shares going back to their fair value and if so what do you estimate a fair value to be...what range ?
4...What outcome would you like to see happening ?
5...Finally, what are you expecting to see revealed in the half year accounts to be released next Thursday ?
Cheers..

Sorry...I pressed the post message button by mistake..
I will resume.......'an appropriate PE ratio of 12 or 13'. giving a prospective share price of around £1.80 to £1.95..
3...If, however, Amigo was still deemed to be in a growth sector (like eg Unilever) , then with realigned values and supporting actions , their share price could attract a PE ratio of around 22, placing an approx value on the share of around £3.30...
The actual share offer price in any sale, however, would be a different matter.
The current PE ratio is 4 indicating imminent demise, and the current yield of 15% supports that , with the majority of its earnings being returned to shareholders.

Yes lots of things going on in the background and hopefully the release of the half year accounts will turn speculation into more clarity..
The emergence of this active investor has lit a touch paper, no doubt seeking to benefit from the fire sale of Invesco's stake as their entry point..
I am found asking myself where does all this leave us. ?
Adding to your position at this time BigB may well prove to be a smart move...

BigB..re the 2 RNS's thanks, I hadn't spotted the RNS of the 21st..
I think the first thing that needs to be cleared up is the major shareholders...to my knowledge TRG owned 61.8% and institutional shareholders held around 20% and ourselves the P.I.'s held around 20% with an extension given to next October to raise this to 25%
Then with the sale of the Invesco stake the I.I's only held 10.72% of which Woodford held 4.99% of that..the emergence of a new active investor has raised the I.I. shareholding to 13.72% including Woodford, so that along with TRG holding of 61.8% comes to the 75% holding that you refer to , but I am not sure how you reached your holding of 75% for TRG and Woodford ??
These figures can be obtained if you Google major shareholders of Amigo and click on the FT tab where it lists them all as at 12th November, after the Invesco sale..
If we assume that the PI's still own around 20% then there is a 5% black hole..( of where the other investors are?) board members perhaps ?
The other point to clear up is that TRG no longer had representation on the board, I think this was announced around the time that they announced an intention to sell a 5% share...(at the date of this announcement I think the share price was actually £2.86). JB announced that he had made the decision to stand down from the Amigo board to pursue his other interests....after subsequently suffering a paper loss of circa £650m , I suspect he has subsequently regretted that decision , and as you say , is now seeking to recoup as much of this as he can...JB was actually once on that secret millionaire programme...He became a billionaire on the flotation of Amigo which propelled him into the top 100 wealthiest people of Great Britain ..if only for a matter of months..!! Don't know where he will stand now ...
The final thing to clarify my position on is the strategy of the Board and Amigos value in any sale...I read the actions of the BOD as simply trying to pause growth and steady the ship and take positive steps to avoid any punitive action by the regulators...the points I made about complaints and the implications of this are all evidence of the problems they were tackling..their actions in my view are neutral and designed to leave all options on the table for its future strategic direction ..
Finally what would be a fundamental share price value for Amigo in any subsequent sale ..?
Well to me it is dependent on how any prospective purchaser perceives Amigo's future ..
I estimate that the current EPS is around 15p per share..
1. If Amigo is seen as now in decline due to the nature and direction of future regulation , like eg Imperial Brands tobacco...then a discounted PE ratio of around 6 would be appropriate, valuing each share at around
90 pence..
2..If Amigo was deemed to be a steady state cash cow proposition , such as eg BP..(once the irresponsible lending had been ended) then an appropriate PE ratio would be around 12 or 13 giving a share price

Bee/BigB.....unless I am mistaken I didn't read this as a proposal or intention to acquire further shares, but as a notification of intent to appoint an independent member to the Amigo board to represent The Richmond Group interests....there is mention of the companies senior loan debenture notes but I don't understand the relevance of this...

Thanks BigB....your response re the high street lenders is probably right...to them ,. a small segment of the market with too high a risk of negative press...you have also made excellent points about public perceptions and impact on funding sources which I hadn't factored in ..yes there is a toxic nature to this product , which without doubt has resulted in real anxiety, anguish and anger in certain percentages of borrowing ...in fact reading individual cases you can see that thoughts of suicide by individual investors have occurred...in this regard I too have my apprehensions about seeking to profit from this sector... Regarding your fear about institutional investors withdrawing , this might already be happening...if you ignore Woodfords 4.99 % stake which will probably be liquidated as soon as, then institutional investors appear to hold less than 6% of the stock..although it isn't clear where the rest of the 110 million shares sold last week went to.
The underlying fundamentals of the business as you say are very sound, which is what swung it for me to invest, (immediately after the 50% fall in share price) after the 1st quarter results were published .and I agree that based on current actual complaint levels, the fall in profitability in no way justifies the ensuing fall in share price , making the share vastly oversold...the first quarter ended in June though and a long time has now elapsed without any update , so the contents of the interim results a week today will be extremely important...half year accounts are frequently a place to announce substantive bad news items and subsequent rebasing of dividend policies...I offer no prediction here, other than observing the downward trending share prices which have been taking place in the run up to their release...

Thanks BB for a very well thought out and reasoned opinion..your classification of the person who goes to Amigo has hit in on the head... I think that all of these complaints now are probably legacy issues going back to the ramped up pilot lending they did just before flotation to increase the flotation price ..Visiting the 'trust pilot' website and looking at recent reviews, and looking at the Amigo website itself and looking at the tone temperament and access they give to complaints does suggest they are keen to learn their lessons..
I take on board your comments regarding the small number of complaints at present but as we all know ..negative word of mouth is ten times more powerful than a compliment..
I guess that going forward a lot has to do with the views of the regulator...and whether they choose to show their teeth and impose fines as they have proved willing to do in the past....it is reassuring that Amigo appears to be working very close with them on this...
You are spot on about Amigo filling a gap in the market place...our biggest threats remain the high street lenders re-entering this space, or a new entrant coming in and significantly undercutting Amigo on APR but just creaming off the higher quality of Amigo borrowers...

Yes BigB. I agree with you there ..once the results are published next Thursday the text regarding the business outlook and the dividend policy will be a key feature...
My policy is to get in on a 50% or more fall , make a quick gain on a bounce and get out again ..but I got in at 74.5p and there was no real bounce so am down over 20% at present and may have to hang around for a little while . I am hoping for good news but am prepared for a downbeat assessment ..

Hi...thanks for your valued comments and as always j find myself nodding in agreement with what you say..Also look though at Amigos own complaints data page on its website and you will see figures of around 3,700 complaints in the first half year with 35% that Amigo themselves upheld...it's possible that only then, will those who had their complaint refused, go to the ombudsman ...of course these complaints might be different in nature such as complaints of rudeness or poor service etc...yes I am eagerly awaiting the results like you....A current PE ratio of 3 and a dividend yield of 16% is usually the sign of the market telling you something...let's hope this is an exception...