International Personal Finance PLC – Lockdown easing is improving collections and enabling them to lend more

International Personal Finance PLC (LON: IPF) is a FTSE All-Share listed, which is engaged in home credit and digital lending business. It provides unsecured consumer credit to nearly two million customers across 11 markets.

Recent News

19 June 2020: The Company announced the appointment of Peel Hunt LLP as a joint broker with immediate effect. The Numis Securities Limited will work alongside Peel Hunt LLP as joint brokers.

Trading Update (as on 10 July 2020)

The Company updated that post lifting or easing of restrictions in European markets in June, almost all the agents resumed weekly visits to customers, and there was phased start to work from the office as well. Moreover, the Group remained resilient in April and May as rent collection continued to improve in June. Also, the Company has been witnessing a strong demand for products, and it can yield higher new credit volumes. The net cash flow generation in June was £42 million (May 2020: £43 million), which was driven by the impact of cost reductions, improving collections performance, and the effective management of credit issued. During the past month, the Company purchased €8.8 million of the Group's 5.75% bonds due April 2021 for cancellation.

Share Price Performance

 
1-Year Chart as of 7 August 2020, before the market close (Source: Refinitiv, Thomson Reuters)

International Personal Finance PLC’s shares were trading at GBX 58.50 (before the market close at 8.30 AM GMT+1) on 7 August 2020, up by 0.52% 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 above the short-term support level of 100-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Risk Assessments

The prolonged states of lockdown can massively impact credit issued and customer collections. Due to Covid-19, agents might not be able to regularly visit customers which can lead to business loss. Moreover, consumers might not spend much due to recessionary economic conditions.

Conclusion

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 current price of GBX 58.50 (as on 7 August 2020, before the market close at 8.30 AM GMT+1). We will recommend fresh buying at the right time.

Capital & Regional PLC – Collected 34% of third-quarter rent so far

Capital & Regional PLC (LON: CAL) is a FTSE All-Share listed UK focused specialist property REIT. It owns seven shopping centres, which are managed through in-house expert property and asset management platform.

Recent News:

17 June 2020: The Company issued 7,935,601 scrip dividend shares. Following the issuance, CAL has a total of 111,819,626 shares in issue.

Covid-19 Update

As per the update released on 3 July 2020, all seven community shopping centres remained open throughout the lockdown period for providing the essential services. Moreover, the lifting of restrictions from 15 June 2020, significantly increased the number of tenants back to trading. At the time of update, 470 stores were back open from merely 68 stores in May. However, the footfall for the week ending 28 June 2020 was nearly 55% of the equivalent week in the previous year, albeit it was 97% higher than the last week prior to the restrictions easing. The Company had already received 34% of the rent for third-quarter since 24 June 2020. Regarding the liquidity as of 30 June 2020, the Group had a total cash balance of more than £81 million. In addition, it had an undrawn revolving credit facility of £15 million available until January 2022.

Share Price Performance

 
1-Year Chart as of 7 August 2020, before the market close (Source: Refinitiv, Thomson Reuters)
 

CAL’s shares were trading at GBX 74.93 on 7 August 2020 (before the market close at 10.31 AM GMT+1), down by 3.45% against the last day closing price. Stock 52 week High and Low were GBX 302.50 and GBX 66.21, respectively.

From the technical standpoint, 14-day RSI is currently in the oversold zone, which means there is a good potential for a short term rebound in the stock price.

 
Valuation Methodology

 
Risk Assessments

The prolonged and intensified impact of Covid-19 can significantly affect the cash flows as tenants are not fully back to trading. Moreover, the declining footfall can put risk to rent collection in future as well. Also, the recessionary economic conditions can impact the disposable income of consumers to spend. Hence, the Company can face massive liquidity or credit risk.

Conclusion
Given the uncertainties of Covid-19, the Company could not quantify the medium- and longer-term impacts on the Group’s operations. However, it manages non-discretionary and essential goods and services, which keep them relatively resilient during unprecedented times. Moreover, most of the stores have been opened, and footfall has increased significantly after lockdown easing. The Group expect the rental income to increase since the trading in stores is improving. It has already collected 34% of rent pertinent to Q3 FY20, which reflects that trading of tenants is improving. Meanwhile, it has adopted measures to reduce costs and preserve cash. It also has paused Hemel Hempstead Leisure project. The Group is also planning to reopen two indoor ski slope sites and expect to back up in time for the peak in Q4.

Over the past four years (FY15 - FY19), the Company’s revenue surged from GBP 80.70 million in FY15 to GBP 88.90 million in FY19. Compounded annual growth rate (CAGR) stood at 2.45 per cent.

Based on the decent prospects which are supported by valuation done using the above method, we have given a “SPECULATIVE BUY” recommendation at the current price of GBX 74.93 (as on 7 August 2020, before the market close at 10.31 AM GMT+1).
 
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.
*Dividend Yield may vary as per the stock price movement.

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