ASA International Group Plc – Increasing Client Base and Loan Portfolio

ASA International Group Plc (LON: ASAI) is an FTSE All-Share listed microfinance Company, which is based in the United Kingdom. It operates through 1,895 branches and employs 12,480 people.

On 22 September 2020, the Company will announce the interim results for 2020.

Business Update in Response to COVID-19 (as on 29 June 2020)
The Company witnessed a strong liquidity position, with a cash balance of US$110 million as of 26 June 2020. Since the start of COVID-19, the Group secured a loan of US$45 million from international and local lending institutions. Also, the total funding of US$200 million is in the pipeline. Given the existing distressing economic situation due to the COVID-19 pandemic, ASAI has suspended the dividend for FY2019. There has been a marginal enhancement in the collection activity post-lockdown in all the operating countries.

Share Price Performance


1-Year Chart as on July-10-2020, after the market close (Source: Refinitiv, Thomson Reuters)

ASA International Group Plc’s shares closed at GBX 137.00 on 10 July 2020 and remained the same against the last day closing price. Stock 52 week High and Low were GBX 395.00 and GBX 46.30, respectively.

From the technical standpoint, shares were trading well above the short-term support level of 50-day simple moving average prices, which reflects an upward trend in the stock. The MACD indicator reading above the line of polarity with positive sentiments.

Valuation Methodology 
 
 

Key Risks

The Company can experience increased volatility in the exchange market, which can affect financial performance. Also, the Company would need to adapt to the changing market landscape, as customers increasingly getting attracted by online services, which are backed by more efficient technology. Given the Covid-19 disruption, the Group was forced to withdraw 2020 guidance.

Conclusion

The Company anticipates that the loan collection will be wedged in the countries where the lock-down is imposed, and the government has provided a moratorium on the loan repayment. The real-time ASA Microfinance Banking System is expected to be launched, which will allow digital connection of all entities. The business operations are certainly affected by Covid-19; however, the Group has taken serval operational and cost-cutting measure to weather the uncertain period. The Group is operating at a strong liquidity position with a good amount of cash balance. In the long run scenario, the Group is expected to continue increasing the client’s numbers and branch across all regions.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the closing price of GBX 137 (as on 10 July 2020).

International Personal Finance Plc– Well Placed to Meet their Credit Needs

International Personal Finance Plc (LON: IPF) is a FTSE All-Share listed financial services Company, which provides consumer finance and home credit services.

In September 2020, the Group will announce the 2020 half-year financial results.

Trading Update (as on 10 July 2020)
Against the COVID-19 background, the Company is encouraged by the extent to which the Group is now stabilising into a new normal operational environment. IPF said collections effectiveness continued to improve in June 2020, reaching 88% of pre-Covid expectations. It was 76% in April 2020 and 80% in May 2020. In June 2020, the Group lent 37% of pre-Covid expectations, an increase from 30% during both of April and May.  The continued improving collections performance, the effective management of credit issued, and the impact of cost reductions resulted in net cash flow generation of £42 million in June 2020 (May 2020: £43 million).

Share Price Performance


1-Year Chart as on July-10-2020, after the market close (Source: Refinitiv, Thomson Reuters)

International Personal Finance Plc’s shares closed at GBX 60.10 on 10 July 2020, up by 15.80% against the last day closing price. Stock 52 week High and Low were GBX 179.80 and GBX 32.55, respectively.

From the technical standpoint, shares were trading well above the short-term support level of 50-day simple moving average prices, which reflects an upward trend in the stock. The MACD indicator reading above the line of polarity with positive sentiments.

Key Risks

Excessive competition in the industry could impact the revenue and profitability of the Group. The continuing pandemic disruption due to coronavirus could further impact the performance.The Company faces several risks to business performance, such as failure to deliver strategy; ability to attract and retain critical staff; ineffective product, client, and geographic diversification; sustained market decline; challenges presented by Brexit; and Cybercrime.

Conclusion

The demand for credit will be stable in a short time. The Group believes that the lower payment collections are temporary due to restricted movement of the public and government moratorium. The lending and collection are projected to improve as the lock-down eases in the operating markets. IPF will lend to the clients with stable credit quality. The Company’s Europe based home credit market had shown strong financial performance and operational execution. The Group also witnessed growth in issued credit from the IPF Digital business with good credit quality.

The Company expects collections effectiveness to improve in the coming months. During May 2020, Moody's reaffirmed IPF’s credit rating at Ba3 (representing stable outlook), comprising the ratings of bonds issued under the Group's Euro Medium Term Note Programme. Moreover, the Group is operating with a strong balance sheet and funding position, which will help them to recommence growth when the short-term disruption subsides. Despite the uncertain environment, the Company is confident towards the strategy as it supports growth and addressing the demands of the customers and shareholders.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the closing price of GBX 60.10 (as on 10 July 2020).
 
*Dividend Yield may vary as per the stock price movement.
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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