When it comes to financial services stocks, investors often prefer predictable income streams and long-term, solvent client bases. Short-term credit providers rely on a sub-prime pool of customers in a rush to pay back their costly loans. Full-year results for Amigo Holdings (AMGO), the first since the guarantor-backed lender listed, are a case in point. Credit quality dropped, while customer growth outstripped a 17 per cent rise in the loan book to £708m.
However, shareholders can have few complaints with these figures. A sharp rise in the top line trickled through to a 75 per cent jump in post-tax profits to £88.6m, a risk-adjusted margin of 37.9 per cent and an impressive 45.6 per cent adjusted return on equity.
“What about when things go wrong?” is one of several potential borrower questions answered on the lender’s website. To Amigo, its guarantor model adds an extra layer of security. But investors will want better guarantees about the regulatory environment beyond a reminder from chairman Stephan Wilcke that a bigger profile for Amigo’s product has “fuelled some urban myths about us and our customers”.
Analysts at Numis forecast net tangible asset value of 62.7p a share by March 2020, rising to 78.6p by the end of FY2021.
| AMIGO HOLDINGS (AMGO) | ||||
| ORD PRICE: | 221p | MARKET VALUE: | £1.05bn | |
| TOUCH: | 221-222.5p | 12-MONTH HIGH: | 315p | LOW: 145p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 51.4p | LEVERAGE: | 3.1 | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016* | 102 | 55.5 | na | nil |
| 2017* | 129 | 45.6 | na | nil |
| 2018* (pro-forma) | 211 | 66.1 | 12.7 | nil |
| 2019 | 271 | 111 | 19.4 | 9.3 |
| % change | +28 | +68 | +53 | - |
| Ex-div: | 18 Jul | |||
| Payment: | 31 Jul | |||
| *Pre-IPO figures | ||||
