Provident Financial Plc – Operating with Strong Capital and Liquidity Positions

FTSE-250 listed Provident Financial Plc (LON: PFG) is a consumer lending Company, which is operating as a specialist lender and serves approximately 2.3 million customers with approximately 4,865 employees.

On 26 August 2020, the Company will announce the interim results for the six months ended 30 June 2020.

Recent News

On 3 August 2020, the Company announced a tender offer for £250 million in 7% notes due 2023 in cash. Under the tender offer, the notes have a 94% of the minimum purchase price of the nominal amount of the notes, whilst the actual purchase price will be determined following a modified Dutch auction process, with a maximum acceptance amount of £75 million.

On 24 July 2020, the Company appointed David Shrimpton as a Managing Director of Moneybarn (the Group’s car finance unit).

Trading Update (as on 27 May 2020)

The Group provided a trading statement covering the period from 1 January to 30 April 2020. The Vanquis Bank adapted well in the unprecedented challenges of Covid-19. Including Vanquis Bank, Total Group liquidity stood at approximately £1.2 billion. Consumer Credit Division business and the clients have also adapted well during the Covid-19 crisis. As of 30 April 2020, the Company’s capital and liquidity positions stayed strong, with surplus above the minimum regulatory requirement of approximately £190 million and regulatory capital of approximately £710 million, reflecting a CET1 ratio of around 33.4%.

Share Price Performance

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

Provident Financial Plc’s shares were closed at GBX 187 on 10 August 2020, up by 4.06% against the last day closing price. Stock 52 week High and Low were GBX 492.70 and GBX 126.87, respectively.

From the technical standpoint, shares were trading slightly above the short-term support level of 50-day simple moving average price, which reflects an uptrend in the stock and carrying the potential to move up further.

Key Risks

The Company could be exposed to adverse cost liabilities if their investments underperform against expectations. Moreover, the Group operates in a regulatory environment; any change in regulations or government policies could affect the overall business of the Company.

Valuation Methodology


Conclusion

The Group has shown a robust balance sheet and generating attractive returns for the shareholders over the medium-term. Despite the regulatory headwinds, the Company had a resilient performance in the first quarter of 2020 and financial year 2019. PFG has the most diverse and strongest funding options in the sector. Furthermore, the Group has a sizeable opportunity to grow customers and market share further. Overall, it will continue to make good progress towards the medium-term financial targets in 2020.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the closing market price of GBX 187 (as on 10 August 2020) and will recommend fresh buying at the right time.

Bank of Georgia Group Plc – Operating with Strong Liquidity and Funding Position

FTSE 250-listed Bank of Georgia Group Plc (LON: BGEO) is a United Kingdom-based holding Company, the new parent Company of BGEO Group Plc. The Group’s business is divided into geographic-based operations.

Q1 FY20 Update (as on 14 May 2020)
In the first quarter of the financial year 2020, the net interest income increased by 3.7% year-on-year to GEL 197.08 million (Q1 FY19: GEL 189.98 million). Despite the impact of Coronavirus for the period, the operating income remained strong and increased by 6.1% year-on-year to GEL 274.48 million in the Q1 FY20 (Q1 FY19: GEL 258.71 million).

In Q1 FY20, the loan book and client deposits increased by 37.3% and 29.1%, respectively, on a year-on-year basis. According to the liquidity position, the cash  and cash equivalents surged by 29.7% year-on-year to GEL 1.51 billion as on 31 March 2020 (31 March 2019: GEL 1.16 billion).

Share Price Performance

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

Bank of Georgia Group Plc’s shares were closed at GBX 800 on 10 August 2020, up by 2.96% against the last day closing price. Stock 52 week High and Low were GBX 1,845.00 and GBX 690.00, respectively.

From the technical standpoint, 90-day RSI is currently close to an oversold zone, which means there is a good potential for a short term rebound in the stock price.

Key Risks

The Company’s performance would be impacted by the macroeconomic factors relating to Georgia, including depreciation of the Lari against the US Dollar. This may also have a material impact on the loan book. The Georgian economy and the business may be adversely affected by regional tensions and instability. The rising COVID-19 cases and U.S.-China tensions may also impact the growth trajectory in the near term.

Valuation Methodology



Conclusion

The Company is expanding the footprint of the banking business in Georgia. The Company signed on 15 July 2020 a five-year US$100 million multi-currency loan agreement with the EBRD (European Bank for Reconstruction and Development). This loan will support micro, small and medium-size companies by providing uninterrupted access to long-term funding. Also, this is the first long-term from EBRD to Georgia as part of coronavirus crisis support. Meanwhile, the Group is well-positioned with robust liquidity, capital, and funding resources. However, the UK market is facing a credit loss (according to the Bank of England), due to the impact of a pandemic. Overall, the Group is an innovative Company with digital leadership and regional wealth management and looking forward to becoming a leading organisation in Georgia.

Over the course of 4 years (FY15 - FY19), the Company’s net profit (from continued & discontinued) surged from GEL 310.95 million in FY2015 to GEL 499.95 million in FY2019. Compounded annual growth rate (CAGR) stood at 12.61%.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the closing market price of GBX 800.00 (as on 10 August 2020) and will recommend fresh buying at the right time.
 
*All forecasted figures and Peer/Industry information have been taken from Refinitiv, Thomson Reuters.
*Dividend Yield may vary as per the stock price movement.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.