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Yes it can. The digital business is helping with growth into new markets but also will cannibalise non digital revenue. The company has guided that growth in digital and Mexico should offset the structural decline of Europe

Glencore seems to reluctantly publish any info on ferrochrome despite being the largest producer. It's almost in denial that it exists. And the Merafe disclosures are rubbish as well.

The role of Samancor in the industry as second largest producer makes things even murkier. It's so difficult to get any information. As part of SLP due diligence I spent hours and hours trawling the web for info

And now that Assore has been taken private we get almost nothing from the top 3 producers.

I agree. Car production in China has recovered strongly but SA production is all over the place. I think we could see rhodium hit $15,000/oz this year. Production in South Africa is recovering quicker than I initially thought but we already saw a huge chunk of rhodium taken out by the Amplats outage before Covid. Despite threatening to close those deep shafts the persistently high PGM price is keeping them open.

We just need chrome to play nice. It seems that there is huge amount stockpiled in China which will take a while to work through. Its shame there isn't a plan to transition to a more transparent pricing system, something like the iron ore model, the industry structure is similar with a small number of producers but I guess the SA producers have nowhere near the clout of Vale/Rio/BHP.

Not sure if you saw Glencore's half year production report, look at the reduction in ferrochrome production...

https://www.glencore.com/dam/jcr:73768468-8e04-4bcf-ae43-f16844720672/GLEN_2020-HY_ProductionReport.pdf

My gut feel says that while covid will be bad the economy will recover much more swiftly than the GFC and so I'm expecting IPF to also have recovered by the end of the year. Initially I had this pegged for a relatively short term trade but now I plan to hold onto this until at least early next year. I think we will see impairments come in lower than what is currently priced in and also some good news on the refinancing.

Hi Ammu, I'm not sure if job support would make IPF better or worse placed given they are the lender of last resort. I would say it would make lower impairments of existing loans but perhaps new business might be lower.

If you look at Hungary's unemployment rate after the GFC it took over a year to peak and then took around 4 years to start falling. I'm not sure how this would compare to the current situation but the GFC impacted most industries while the current position seems to be showing a lot of relatively protected sectors with most of the damage limited to hospitality and bricks and mortar.

https://tradingeconomics.com/hungary/unemployment-rate

Hey TBTT,

I see a tick up in Rh to $12,800/oz on BASF today. Hard to get a reliable steer on what the price is but seems a bit of panic creeping in with nearly a $4,000/oz rise just this month.

By my calcs 55% of 6E PGM revenue is from rhodium or around 30% of total revenue including chrome. I wonder if anyone even knows that Tharisa produces rhodium? THS is looking at a record quarterly price basket. Just in Q4 they are looking at an additional $5-10m in EBITDA from the rise in rhodium this month.

Its a shame production isn't a little higher. Based on guidance of 133.5koz and Q3 YTD production of 101.5koz this implies Q4 production of 32koz 6E OGM. I’m not sure why this would be lower than the 35koz from the Covid impacted Q3. Potential upside or something they haven’t told us?

John Pearson, non-executive director has agreed to surrender 120,000 share options granted at £1.16 and a further 120,000 granted at £1.74.

How noble of you John.

A 40p exercise condition is weak. Maybe in year 1 for a 40% increase but what about the rest of the years? Does this show the true ambition of the company? The SP was once £1.50 and now they are settling for 40p?

I would recommend looking at the chart for IPF going all the way back to 2009 at the depth of the financial crisis to see the real recovery potential. During the GFC liquidity collapsed leading to the meltdown of the financial system, a short sharp recession and a huge spike in unemployment. Similar conditions to now really (although unemployment nowhere near as high yet) with similar consequences for IPF regarding higher impairments and less new business as credit conditions tightened.

In May 2009 the SP tanked to around 75p and was in a reasonably tight range between 65-80p for a few months. In July they released half year results which were pretty awful but not as bad as expected and which showed signs of recovery in the second quarter (and they still committed to paying a small dividend). The SP subsequently shot up to 135p in a week and over the next two years nearly hit £4. You can see yourself what happened after that.

A lot of things have changed since then, sure, most notably the home credit regulatory environment but IPF also now has a large digital business. But the asset and credit issued numbers of 2020 are not dissimilar to 2009. Yet the SP is at a historic low, I think maybe the lowest in the entire history of IPF.

My point being if the business can recover from the GFC then it no doubt can recover from covid. The challenge is looking past the 5-10% short terms movements to the real prize somewhere in the future.

Heres the link for the 2009 news releases

https://www.investegate.co.uk/Index.aspx?searchtype=3&words=ipf&pno=16

The credit agency reports are a great summary to getting to understand the company, and the risks, and really highlight the resilience of the business, even in periods of high unemployment like the GFC (and hopefully covid) and in the face of constant regulatory scrutiny.

https://www.ipfin.co.uk/content/dam/ipf/corporate/investors/debt-funding-information/Fitch%20International%20Personal%20Finance%20plc%20-%202020-06-12.pdf

https://www.ipfin.co.uk/content/dam/ipf/corporate/investors/debt-funding-information/Credit%20Opinion%20-%20International-Personal-Finance-plc%20-%2022May20.pdf

I think the key point is the current share price has factored in a level of impairment losses much higher than is likely considering the fundamentals. Even though some additional impairments will be recognised, as required by accounting standards, this does not accurately reflect the ultimate cash flows.

The assets in the financial statements are already reported with an average 30% impairment ratio given the poor credit history of its customers. So I think this would need to increase to 60% or even higher to justify the current SP. And I don't really know how a finance company could raise funds or even exist with a level of impairments this high.

Whatever the impairment ratio was at June its likely to have improved significantly in July and August. I think this argument extends to the entire financial sector but value is very much out of vogue right now given low growth, cancelled dividends and the storming tech success so will take time for the cash flow to return and turn things in value's favour.

https://www.boerse-frankfurt.de/bond/xs1054714248-international-personal-finance-plc-5-75-14-21

That's an interesting article, thanks for sharing. It seems deliberately provocative but I think there is truth in some of the comments. Just before the lockdown started the SP was 160, now its 65. Has there been a 60% destruction in the loan book and a permanent 60% loss of new business value since then... IPF is being brought down by the general finance sector malaise. The reduction in value is comparable to Lloyds, Natwest etc.

the €400m eurobond is actually trading at 94.5 with a 5.75% coupon...

There is also a 7.75% £78m sterling bond due in 2023 which I have mentioned below

Powering ahead with spot NG prices at $2.54 compared to the 2020 H2 floor of $2.65. 20% of production is unhedged so we might even see some price upside for this year.

The futures curve for 2021 is ahead of the DGOC hedged floor of 70% of production hedged with a floor of $2.62. 2022 is even better with available prices in excess of $3 compared to 45% of production hedged at $2.50.

I imagine management will be increasing the proportion of future hedged production at these prices giving further comfort over the dividend.

Delayed reaction from me as I was offline for the week but seems that last week's trading update was pretty much exactly what we had expected with rising collections and slowly improving new business. The £45m tax win was a pleasant surprise although I guess was largely factored into the SP given it was included in the non current tax balance in the financial statements.

I think its unlikely that we will see a dividend this year given the refinancing overhang. Any spare cash should be applied to a lower debt balance given the current refinancing risk perception. I note the broker comments that this overhang is holding back the SP and I see that as the opportunity. That debt is more than covered by existing assets without new collections and the debt trades at 92c on the dollar (versus 103c pre covid) which indicates a reasonable level of confidence that debt will be repaid. I think worst case scenario is that there is an equity raise but I don't see it. There's a still a lot of cash sloshing around looking for a home in a 7.75% coupon.

Unfortunately the SP doesn't seem to be to hold onto its gains with a slide back below 70p today. Obviously some institutions are desperate to get out but the shorters are staying away for whatever reason. Half year results in a few weeks will be important to get an idea of expected impairments and recoverable NTA.

I think these are due any day now. I believe they said a few weeks on the investor call three weeks ago. Could really put a rocket under this with some new KPIs, hopefully a hint of July and August trading performance with maybe a hint of follow on guidance for the rest of 2020 and just maybe a new Teams telephony contract or 2 to whet the appetite.

I see that Pwc and Schroders have officially embraced remote working this week and I've noticed that a number of smaller firms have decided to close their London offices.

https://www.marketwatch.com/story/pwc-and-schroders-expect-more-staff-to-work-remotely-after-pandemic-passes-2020-08-17

https://www.law.com/international-edition/2020/05/27/slater-and-gordon-to-close-london-office-staff-to-work-from-home-permanently/?slreturn=20200718081054

I'm pretty much in the same ballpark as both of you. My model tells me NPAT of $55m this year with revenue of $390m and EBITDA of over $100m. This reflects the significant increase in the basket over the last month which puts it not far from the pre covid record.

Next year is when it gets really interesting. If the expansion plans come to fruition we could see max run rate EBITDA of $250m in 2021 but more likely to be closer to $150m for the year, assuming a 10% uplift of production rather than the aggressive expansion the Vision 2020 plan has targeted.

Either way the current MCap is $280m and I think net debt will be close to 0 as a result of the delayed capex spend. I don't really deal in P/E but you are looking at an EV/EBITDA of 2x and a free cash flow yield of 25-30% assuming a reasonable amount of capex. I would say a decent starting point is 3x which would be a 50% uplift to 120p from here.

Not much news on the horizon with Q4 in October and finals in December but we could see it continue to grind towards £1 if PGMs stay around these levels or rise and the Q4 results are at least in line with guidance. THS has a lot of rhodium revenue exposure (12% 3E prill split, like SLP) so really has the wind in its sails. Longer term if they can avoid a repeat of the production issues in the past and chrome prices recover there's no reason why this won't be closer to 150p sometime next year.

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We're planning to provide a trading update detailing high level performance for July. I return to work tomorrow after annual leave so at this stage I can't confirm the date but it should be later this week.

Just noticed the volume today...churning through a huge amount of shares, that 220p floor is looking pretty solid now

324p target on a very conservative consensus forecast with no Teams upside. Bullish