RE: woooah11 Nov 2019 23:45
Lots of good insights all...I will add the following considerations in no particular order...
1. Don't overlook the intentions of the major shareholder, they do have the capacity to manipulate price for whatever purpose...just look at the price change in the past couple of weeks...from 80p to 62p with no published data to suggest the fundamentals as laid out in the 1st quarter results have changed...these fluctuations were on the basis of less than 10 million shares changing hands (ignoring the RNS and surrounding transaction ). The major shareholder has 290 million shares...!!
2. It could on the other hand just be a way for institutional investors to transfer holdings to private investors to build up the 25% required P.I. holdings..
3..Indication of an advance leak of the half year results.....the share price fell from £1.70 to £1.45 on the eve of the publication of the 1st quarter results..the price then halved on the day of publication..
4...Acknowledged that rebalancing of AW and Invesco holdings might also be a factor..
5..Possibility of a deteriorating outlook ..due to the following..
(a). Impairments have increased rapidly in a short time along with attributable additional admin and collection costs...this supports the view that the loan book was ramped up just before flotation to increase the flotation price, with a large tranche of even weaker sub prime borrowers which were referred to as "pilot borrowing" .
this would explain the large increase in impairments which has resulted in more careful future lending..
It can be evidenced by less than 15% of applicants now being accepted for a loan..
(b). The accounting change of forward provisioning of impairments on new loans will be a factor , and furthermore it will still have to fully unwind throughout the remainder of the year for all new borrowing.. ..not sure if this requires immediate provisions for loans undertaken prior to the accounting change.
(c). The dividend on offer at 9.32 pence is a very attractive one , but dividend policies do change...the original intention was for it to be set at 35% of the adjusted EPS, then at the year end it was increased to 50% of basic EPS to reflect the improving outlook...at the first quarter the policy became the greater of 50% of EPS or matched to that of last year...any further deterioration might jepordise the future dividend.
(d) It was a major drop in price today and the floor of 67 pence was breached in a definitive manner..the downward trend may not be over .
Yes I remain a conviction buyer, but that is only based on what I know and is in the public domain , and there remains an abundance of conspiracy theories around which will only be chrisalised when the half year results are finally published on the 28th..
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