H & T Group Plc

H&T Group Plc (LON: HAT) is an FTSE AIM All-Share listed Company, which provides a range of accessible financial products to the customers who have limited access from the traditional financing institutions.

The Company will release full-year results for 2020 on 23 March 2021.

Investment Highlights – H & T Group Plc – Avoid at GBX 307.00

• Despite the availability of decent cash resources, the customer demand remained lower, which will disturb the growth trajectory.
• In the last one year, the Company delivered a negative return of ~19.02% and delivered lower returns compared to the benchmark Index (FTSE-AIM Index).
• As per valuation metrics, EV/EBITDA and Price/Earnings multiples of the H&T Group Plc are currently higher as compared to the corresponding multiples of the Banking Services industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is in the overbought zone and is supporting downward movement (around 72 level), which means the stock price could decline in the short term.

Key Risks

• Personal lending customers were materially impacted by the Covid-19 pandemic, which could lead to a credit loss.
• Reduced product demand with changing consumer behaviour can impact the Company’s growth trajectory.
• An economic downturn and higher unemployment might impact loan repayment and redemption profiles of the customers.

Trading Update for FY2020 (released on 25 January 2021)

• The Company expects PBT (profit before tax) for FY2020 to be ahead of market expectations, driven by strong performance in November and December.
• All of the 253 stores remained open with reduced trading hours and availability of money transfer, cheque cashing, foreign exchange and pawnbroking services.
• The Companies e-commerce websites were operational, and customers are offered retail jewellery through click and deliver service or click and collect service.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

Despite the challenges presented due to covid-19, the Company expects strong performance in the financial year 2020, with higher profit before tax than expectations. The Company witnessed a recovery in the pledge book while entering the financial year 2021. Despite the ongoing restrictions, HAT’s retail operations remained strong. Although the business has shown recovery since the stores reopened, albeit the macro-economic uncertainties will keep the customer sentiment dented in the short-term and re-establishing the business to pre-closure level would take some time. Stock 52 week Low and High were GBX 195.00 and GBX 398.00, respectively.

Given the heightened level of uncertainties, we recommend a “Avoid” recommendation on H&T Group Plc at the current price of GBX 307.00 (as on 27 January 2021, before the market close at 8:00 AM GMT), while we look forward to reviewing the support from upcoming catalysts such as investment in technology, training & development and store estate.

*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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