ipf30 Dec 2013 12:28
Broker snap: IPF given a 'buy' rating after shares fall on Polish fine
Date: Monday 30 Dec 2013
LONDON (ShareCast) - International Personal Finance’s (IPF) shares have taken a hit following news last week that it had been fined 2.4m pounds from the Polish consumer protection office over the way it calculated APR amounts.
Numis Securities said the drop in shares presented a good buying opportunity.
“Given the dramatic share price decline we believe this risk is more than reflected in the share price and our recommendation moves to buy,” the broker said.
The analyst added that the fine “does not materially concern us of greater concern is the discussion paper which is looking at changing the interest rate cap to a cost of credit or APR cap”.
“These two combined in a worst case scenario could fundamentally impact the Polish business which accounts for 45% of IPF's profit.”
If IPF loses its appeal against the fine and a total cost of credit cap comes in then there will be no problem but if they lose and a total cost of credit cap is imposed then there is a major problem, Numis said.
The broker estimates that IPF will generate 25% earnings growth from its non-Polish businesses in 2017, implying a 2017 price/earnings to growth ratio in a worst case scenario of 0.32x.
“We believe IPF provides an attractive risk reward profile, best case 5.8x earnings, worst case 8.0x earnings.”
Shares rose 7.18% to 487.90p at 11:30 on Monday.