AMGO29 Aug 2020 11:12
Amigo shares are currently one of the most watched by investors in recent weeks and with good reason. With big risk often comes the opportunity for an even bigger reward.
On a surface level, the troubles that Amigo has would be enough to have most investors running for the hills and never looking back!
However, there are a number of reasons as to why investors may see opportunity for phenomenal gains in the mid-long term. Here we sum up 5 of them:
1. Unlike traditional retail, consumer lending is not in structural decline
The wider industry that Amigo Holdings operates in is not in structural decline. If you compare to an Intu for an example – the traditional retail industry had been on an irreversible decline for quite some time which has only been compounded as of late.
Lending has and will always be around. People unfortunately will find themselves in financial difficulty.
Looking at some comparable peers such as sub-prime lender Provident Financial, you will see that they are holding up well.
2. The wider macro environment should be favourable to Amigo when it restarts lending
With continued job cuts and reservations in hiring, it seems logical that people will need loans and perhaps more of them.
As a guarantor lender, Amigo’s underlying business model does have the intent of lending responsibly to those who struggle to access credit. It may be in the middle of a barrage of complaints, but with a proposed revised scorecard and credit policies, it may come out firing again as it learns some valuable lessons.
3. It has cash and still made a profit!
While the outcomes of the complaints are unclear, it still has plenty of cash and cash equivalents; £145m. This provides some reassurance. And even though it hasn’t been lending to new customers, it did still turn a profit during its latest quarter.
It also claims that it is on track to meet deadlines for complaints.
4. Its founder wants back in and offered up to 20p per share
Make no mistake about it. Its founder James Benamor is a straight-talking, hugely successful businessman. He wants back in as he knows there is plenty of opportunity left in this business if it completes a successful turnaround and it will be of benefit to the shareholders as well as himself.
He has openly said he will commit to buying 29 percent of the company at up 20p per share and higher if need be should his proposal to become group CEO be pushed through. Shares are currently at 13p and shares did hit 17p days ago – soaring 30 percent alone on his proposal to return.
The pricing of the shares is reflective of where it is today, not where it could be in the future.
5. Whoever wins, they will be hungrier than ever to succeed
There is clearly passion for this business, it is clearly loved by the founder and the passion has been reignited from the existing board. Whoever runs the show in future will be hungrier than ever to succeed.
The current board will be pushing harder than e
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