There is no shortage of unbanked individuals to lend to around the world, even when that credit carries a high cost. For proof, just scan interim results for microfinance specialist ASA International (ASAI), which detail a whopping $73.2m (£58.9m) in interest earned from loans to customers in the six months to June, during which time the loan book climbed from $379m to $420m. Little surprise, perhaps, that the group does not report the average interest rate on its lending products.
Then again, the alternatives for many of ASA’s borrowers are far worse. And for ASA itself, extending credit to fledgling female-led businesses in developing economies comes with several obstacles, even as lending, client numbers and branches continue to grow at a clip.
For one, there is currency exposure management. The larger-than-expected depreciation of the Pakistani rupee and the Ghanaian cedi hit ASA’s two largest markets, wearing on dollar earnings so much that “normalised net profits” – a metric which strips out the cost of last year’s initial public offering – declined 2 per cent to $16.1m. Earnings in constant currency terms, if such a thing can ever be expected, would have been up 8 per cent.
Then there is credit risk. Conditions in South Asia and West Africa mean the percentage of loans more than 30 days in arrears has more than doubled to 1 per cent in the past year. In East Africa, where profit growth remains strong, loan quality looks stronger.
Consensus analyst forecasts are for earnings of 36¢ a share this year, rising to 47¢ in 2020.
| ASA INTERNATIONAL (ASAI) | ||||
| ORD PRICE: | 351p | MARKET VALUE: | £ 351m | |
| TOUCH: | 349-369p | 12-MONTH HIGH: | 500p | LOW: 310p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | NA | |
| NET ASSET VALUE: | 90.6¢ | LEVERAGE: | 5.7 | |
| Half-year to 30 Jun | Total operating income ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2018 | 55.5 | 17.5 | 2.3 | nil |
| 2019 | 65.2 | 24.9 | 0.2 | nil |
| % change | +18 | +42 | -93 | - |
| Ex-div: | n/a | |||
| Payment: | n/a | |||
| £1=$1.25 | ||||
