Amigo Holdings PLC

Amigo Holdings PLC (AMGO) is a Bournemouth, United Kingdom-headquartered consumer finance group and is one of the largest providers of guarantor loan in the UK, which, through its subsidiaries, provides sales financing services. It offers unsecured guarantor loans to those who are unable to borrow from traditional lenders and helping them to rebuild their credit scores and improve their ability to access credit.

Financial Highlights (Q1 2020, in £m)
 
(Source: Company Filings)

Driven by a 17.3% rise in customers to 210k, net loan book recorded an increase of 14.1% year on year to £728.4 million (Q1 FY19: £638.2 million), and the company continued to grow its gross loan book. Due to more cautious IFRS 9 assumptions around the economy, the impact of higher origination and operational challenges within collections, impairment/revenue ratio rose to 30.5% (Q1 FY19: 25.4%), even as the group reported significant growth in revenue to £71.5 million, an increase of 13.7% (Q1 FY19: £62.9 million). Due to a provision for complaints and accelerated investment, cost/income ratio increased to 23.4% (Q1 FY19: 17.5%). Statutory profit after tax was up by 47.2% at £18.1 million and adjusted profit after tax was £20.4 million (Q1 2019: £21.8 million), which reflected the combination of higher provisions and increased costs. The company reported a £100 million increase in securitisation facility in June 2019 and net borrowings/adjusted tangible equity stayed within expectations at 1.8x (Q1 FY19 2.5x). Due to the increase in share count and reduction in profit after tax, adjusted basic earnings per share decreased by 21.8% to 4.3p, while basic earnings per share increased 22.6% to 3.8p.

Valuation Methodology
Method:  EV/SalesApproach (NTM)
 


*Peers of the company are International Personal Finance PLC, Non-Standard Finance PLC, Provident Financial PLC, S&U PLC, ASA International Group PLC and Arrow Global Group PLC


Share Price Commentary

Daily Chart as at 31-October-19, before the market closed (Source: Thomson Reuters)

On 31 October 2019, at the time of writing (at 1:37 pm GMT, before the market closed), AMGO shares were trading at GBX 68.9, down by 2.68 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 297.50/GBX 66.79. The company's stock beta was 1.38,reflecting more volatility as compared to the benchmark index. The outstanding market capitalisation was around £336.54 million, with a dividend yield of 1.49 per cent.

Conclusion
While the company believes that impairments are likely to remain at a higher level and operations might be negatively impacted by ongoing Brexit. Strong demand persists for its guarantor loan product and new customer numbers will continue to grow. The company is also taking a cautious lending approach through an increase in provisioning and further enhanced its credit policy related to relending. New customer lending is being prioritised over relending to existing customers and the company is continuously accelerating investment in its operations to enable continuous delivery of best in class customer service.

Based on the prospects of the group, and supported by valuation done using the above method, we have given a "SPECULATIVE BUY" recommendation at the current price of GBX 68.90 (as on 31 October 2019) with high single digit upside potential, based on 2.86x NTM EV/Sales(approx.) on FY20E Sales(approx.).
 

Anglo African Oil & Gas PLC

Anglo African Oil & Gas PLC (AAOG) is a London-headquartered oil and gas and mining company. The company offers a wide range of services, including extraction, exploration, operations, production, management, and development of oil and gas natural resources. It owns and operates Petro Kouilou and holds interest in the Tilapia Field that is located to the offshore of the Republic of the Congo and located in the Lower Republic of the Congo Basin and produces oil and gas. The group also holds, owns, and operates onshore production and storage facilities, producing oil and natural gas assets and resources. The company has its operations in the UK and the Republic of the Congo.

Recent Development
The company on 22 October 2019 announced that it might receive up to $25 million in offtake and prepayment financing for the development of the Tilapia field in the Republic of the Congo as it had entered into a non-binding indicative term sheet with an international oil marketing and trading company. However, the agreement is dependent on its completion and on bringing well TLP-103C-ST into production and would help the company in avoiding the need for further equity financing and subsequent dilution for shareholders.

Financial Highlights (H1 2019, in £m)
In the first half of the financial year 2019, the company’s revenue was at £173,524 versus £106,378 in H1 2018. Due to an increase in the administrative expenses for the period, the company reported operating loss of £2,451,710 in H1 2019 versus an operating loss of £2,170,805 in H1 2018. The reported loss before tax and loss after tax were at £2,452,741 respectively against £2,171,606 in H1 2018, which reflected the significant costs that the group has incurred in building the team to capitalise on the opportunity presented by TLP-103C.The basic and diluted loss per share was 1.03 pence in H1 2019 versus a basic and diluted loss per share of 2.71 pence in H1 2018.

Share Price Commentary

Daily Chart as at 31-October-19, before the market closed (Source: Thomson Reuters)

On 31 October 2019, at the time of writing (at 2:09 pm GMT, before the market closed), AAOG shares were trading at GBX 2.758, down by 1.85 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 19.00/GBX 2.40. The company's stock beta was -1.67,reflecting an inverse relationship with the benchmark index. The outstanding market capitalisation was around £11.14 million.

Conclusion
Although the top-line performance has improved but the bottom-line performance has declined for the period. The group expects the second half of the year to show a significant reduction in non-standard operational expenditure. The company is looking forward to increasing its production through development in Tilapia and expand its surface facilities through a field-development plan which include ten additional wells. This strategy has been facilitated by the achievement of the drilling of TLP-103C and the detection of hydrocarbons at each level that was breached. The company was able to increase its production in the upcoming financial year 2019.

Based on the prospects of the group, we have given a "SPECULATIVE BUY" recommendation at the current price of GBX 2.758 (as on 31 October 2019, before the market closed).
 
*All forecasted figures and peers have been taken from Thomson Reuters.

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