LIBERUM: Non-Standard Finance - Prudent actions taken should position the business well
We believe that NSF’s response to the current pandemic is in the interests of all its stakeholders. The operational shift towards remote working helps protect its staff whilst enabling its clients to continue to access the services they need. Similarly, its decision to reduce lending and focus on its existing clients and those most in need, is the prudent thing to do. These actions, combined with the high risk-adjusted margins on its existing loan book should enable the group to generate positive cash flow, even allowing for an increase in impairment during the current period of economic uncertainty. This should leave the group in a stronger position to serve its clients and win share when the current government restrictions are lifted. As a result, of this medium-term outlook we reiterate our BUY rating.
27 Mar 20
THE MONTHLY March 2020
Much of the UK’s privatisation programme took place between the early 1980s and the mid-1990s: subsequent sales have been few. Undoubtedly, privatisation attracted many private investors to the market, many for the first time.
NSF AVO AGY ARBB ARIX BUR CLIG DNL FLTA GDR PCA PIN PXC PHP RE/ RECI RMDL STX SCE SIXH TRX SHED VTA
02 Mar 20
Sunshine after the rain
“The focus for the next few years is on relatively modest investment and on driving return on assets towards our medium-term target of 20% for each division”. So said John van Kuffeler at the 16 January 2020 capital markets day. After an eventful 2019, 2020 (and beyond) is now all about operational delivery, the “boring” grinding out of profit from a franchise that has seen heavy investment over many years. We welcome this focus and think it will help deliver the 84% EPS growth (2021 on 2018) in current consensus estimates. The accompanying trading statement indicated 2019 results would be in line with market expectations. The shares rose 15% on the day.
11 Feb 20
External factors dent recent rally
Concerns over the global economic impact of the coronavirus outbreak have caused equity markets to fall sharply in recent weeks. This halted the Q4 2019 rally which had carried on into the current year, due to a combination of strong/record US markets, progress on the US-China trade relations and greater optimism in the UK following the election. The vast majority of company updates have been in line with expectations, although as usual there have been some shocks. What is not yet clear is the current state of the domestic economy. The CIPS/IHS Market PMI survey for January 2020 showed an improved picture. The Bank of England kept interest rates at 0.75%. In this edition, we look at the issues surrounding liquidity for open ended funds following some of the events in the last year. The state of VCT fundraising and we also take a snapshot at the “snakes and ladders” on the AIM market in the last year. In the near term, we are still in the midst of company trading updates and/or results. (diary on page 13). We also have the Budget due on 11 March which will to set out the government’s economic growth plan.
NSF AFHP AOR BAG BONH CML CPS EYE EPWN FDM FA/ HUW HYDG INSE JDG KAPE TMG NBI NUC OTMP SCS SOS SUR TCN VRE WINK WYN YU/
04 Feb 20
Hardman & Co Monthly: February 2020
We recently published a paper, Share ownership: For the many, not the few, based on a statistical survey of share ownership, produced jointly with Argus Vickers, the share analysis service. The Office for National Statistics (ONS) has now issued its equivalent survey. This paper compares its results with ours. Although there are, inevitably, differences in the detail, the two surveys reach the same conclusions.
NSF AVO AGY ARBB CLIG DNL FLTA GDR MCL PCA PIN PXC PHP RECI RMDL STX SCE TON VTA
03 Feb 20
On 16th January 2020, NSF hosted an investor day at which the group delivered a series of presentations on each of its three key operations: branch-based lending, guarantor loans and home credit. What came across clearly to us was that, following a period of significant investment, the group is now moving into a phase where the benefits of this should begin to flow through to the bottom line. Underpinning this is a highly experienced management team, which has put in place a strong corporate culture that is shared across the group and is focused on responsible lending and responsible collecting. We believe the event will have served as a strong reminder to investors that the outlook for the group remains positive and, with the overhang from Woodford IM and Invesco having been removed, we think the shares should close the gap to our fair value of 55p.
20 Jan 20
LIBERUM: Non-Standard Finance - CMD: Business as usual, but with less expensive funding
In December, NSF reduced its loan book growth targets for all three divisions. We believe that anyone who attended the Capital Markets Day will now be certain that this was a discretionary choice taken in order to allow profitability and returns to rise, and so, logically, to correct a very low valuation.
17 Jan 20
Sunshine after the rain
“The focus for the next few years is on relatively modest investment and on driving return on assets towards our medium-term target of 20% for each division”. So said John van Kuffeler at the 16 January 2020 capital markets day. After an eventful 2019, 2020 (and beyond) is now all about operational delivery, the “boring” grinding out of profit from a franchise that has seen heavy investment over many years. We welcome this focus and think it will help deliver the 84% EPS growth (2021 on 2018) in current consensus estimates. The accompanying trading statement indicated 2019 results would be in line with market expectations. The shares rose 15% on the day
17 Jan 20
LIBERUM: UK Small & Mid Cap Dispatches
Consumer Discretionary Sector In-Depth, Strategy Quarterly Style Review, Alternative Funds Portfolio 2020, Big Yellow, Clinigen, 4imprint, Judges Scientific, Ten Entertainment, Vertu Motors, Kier Group, Non Standard Finan...
NSF ABF ASC BME BOO CARD DC/ DPEU FRAS HFD HOTC JOUL MKS MCLS WINE NXT PETS SIS SDRY TED TPT ZAL ZO1 RECI SONG HVPD OCI PSHD VOF CLIN FOUR JDG TEG VTU KIE BYG WKP HAS PRTC SPI CLL
16 Jan 20
THE MONTHLY January 2020
The Office for National Statistics (ONS) is due to publish its most up-to-date survey on share ownership in mid-January, which identifies the beneficial owners and decision- makers of the stock market. Hardman & Co has worked together with the share analysis service, Argus Vickers, to jointly produce its own survey, which anticipates the conclusions of the ONS survey but goes into much greater detail. Our work does not use a sample of 200 quoted companies as the ONS historically has, but rather includes everyUK quoted company. The ONS samples share registers every two years; our study uses six-monthly data points. Our survey also extends to shareholders on NEX; the ONS does not.
NSF AVO AGY ARBB BUR CMH CLIG DNL FLTA GDR MCL PCA PIN PHP RECI RMDL SCE SIXH SHED VTA
10 Jan 20
Time to take another look
FY 2019 was an eventful year for Non-Standard Finance, during which the group embarked on an ambitious, but ultimately unsuccessful, takeover of its larger rival Provident Financial. In addition, there has been a significant rotation in the shareholder register, with funds managed by cornerstone investors Invesco and (legacy) Woodford selling down their positions and being partly replaced by special situations investor Alchemy Partners, which has now amassed a 29.95% stake in the group. These factors, combined with a recent update to medium-term financial targets to capture a more uncertain UK economic outlook, have acted to drive a 67% drop in the share price over the past year. As a result, the stock now appears extremely undervalued relative to its fundamentals. Trading on a 2020F PER of 3.6x, dividend yield of 16.6% and P/TNAV of 1.1x for an adjusted RoTE of 33.2%, we think now is a good time to take another look.
08 Jan 20
LIBERUM: Non-Standard Finance - Non-Standard Value
Despite there being no increase in customer arrears, the Q3 trading update brought operating downgrades, higher provisioning and lower growth targets. And yet, and yet, what value…at 4x earnings, 1x tangible book, 18% yield, even with a 9% cost of funding. With some changes in the share register you can see why this has happened, but also why, just as quickly, it could go the other way.
11 Dec 19
Building in more prudence
Non-Standard Finance (‘NSF’) issued an unscheduled trading update on 15th November 2019 that warned of slower than expected growth in the guarantor loans division and higher impairments due to more conservative macroeconomic assumptions. The group has also revised its medium-term financial targets in light of UK macroeconomic uncertainty and is now targeting slower loan book growth, albeit at still very attractive returns. Following this update, we have downgraded our adjusted EPS estimates for 2019F, 2020F and 2021F by 26%, 26% and 28%, thus prudently capturing the lower end of management’s revised financial targets. Consequently, we reduce our fair value to 55p (from 75p). In line with our conflicts of interest policy, Shore Capital does not have recommendations on “House” stocks.
18 Nov 19
Trading update: understand the accounting
NSF has issued a trading update highlighting a 4%-5% reduction in consensus estimates due to softer trading in 3Q (primarily lower loan volumes in guarantor loans, a market which has been affected by adverse press coverage) and a 6%-8% reduction associated with a step change in provisioning policy. The latter highlights yet again the importance of understanding the assumptions in provisioning. For the same arrears, a higher assumed probability of downside has increased provisions. This reflects the known cyclicality inherent in IFRS9. A downgrade is unwelcome, but it does not reflect current customer deterioration, only the Board’s cautious approach. After today’s reduction’s, we still forecast 2021 adjusted profits at 2x the level of 2018.
18 Nov 19
THE MONTHLY November 2019
The trade-off in the risk/reward for gold and gold mining equities is improving, as central banks push the current iteration of the post-World War II Bretton Woods financial order towards its limits.
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04 Nov 19
THE MONTHLY October 2019
Since their privatisation in 1989, the 10 water companies have faced a periodic review every five years; it is undertaken by Ofwat, and prescribes customer prices, along with the investment requirements. As part of the ongoing review, PR19, Ofwat will publish its Final Determination numbers on 11 December 2019; they will apply as from April 2020, although water companies do have the option to seek a reference to the CMA.
NSF AJB AGY ARBB CLIG DNL DPP FLTA GTLY GDR KOOV MCL MUR PCA PIN PHP RE/ RECI RMDL STX SCE SIXH TON SHED VTA W7L
03 Oct 19
THE MONTHLY September 2019
The challenges associated with value creation drive all investors. Any investment professional is eager to make their mark by picking organisations that are able to deliver superior returns. Increasingly investors look into how organisations are governed and how effective the top decision-making bodies of organisations really are. In this white paper, we shed light on research findings and reveal the seven hallmarks of effective boards. The seven hallmarks are proven to create more effective boards and are set to be the next lever in the value creation process. Better Boards has created advanced board evaluation tools designed to motivate and inspire and above all, contribute to superior value creation.
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03 Sep 19
Full steam ahead
In its first set of figures since the lapse of the all share offer for Provident Financial on 5th June, NSF reported what we regard as a solid set of interim results for the half year to 30th June 2019. Overall, the group continues to demonstrate good momentum with strong underlying profit growth reported in each of its three operating divisions (branch-based lending, guarantor loans and home credit). While reported profit performance was impacted by significant exceptional charges, including bid costs (£12.7m) and a non-cash goodwill impairment (£12.5m), the group still chose to increase the interim dividend by 17% as a sign of confidence in the balance sheet and the outlook. Following a recent derating of the shares, the valuation appears very undemanding. House Stock
30 Aug 19
Now is the time for profit
NSF has reached the turning point in its strategic development. Having invested heavily in infrastructure, controls and people, it has substantially built the franchise. The pace of further investment is expected to now slow, at the same time as payback from historical investment becomes increasingly visible. We see profit growth accelerating sharply, driven by wider jaws between revenue and costs in the branch business and guarantor loans, efficiency improvements in home collect, and improving credit. Assuming NSF is successful in securing additional lower-cost funding, we expect funding costs to relatively reduce, and the funding mix to improve. Our strong growth forecasts are unchanged.
29 Aug 19
LIBERUM: Non-Standard Finance - EPS +13%, DPS +17%, trading in-line
One stable cash-generating business, one growing at 40% and the big one growing at 22%. The company is working towards lower borrowing costs and higher returns at its biggest business as it moderates growth and benefits as recently-opened branches mature.
20 Aug 19
THE MONTHLY August 2019
The introduction of IFRS 2 in 2004 generated considerable debate about the best approach for handling ‘share-based payments’ (SBP). While it is clearly a cost to shareholders, which should be included in the statutory reporting lines through the P&L account, the question arose as to whetherit should be part of our underlying EBIT calculation.
NSF AVO AJB AGY ARBB CLIG DNL DPP FLTA GTLY GDR KOOV MCL MUR OXB PCA PHP RE/ REDX RMDL STX SCE TRX TON SHED VAL VTA W7L
01 Aug 19
THE MONTHLY July 2019
When advisers first start looking at business relief (BR) products, there is much to take in: the rules governing such products; the investment strategies being used; and what the investment risk is. It is easy to lose sight of the fact that, for non-AIM products, the investment is being made directly into a company or partnership, rather than a fund. It is, therefore, essential that governance is part of the diligence process.
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02 Jul 19
Back to basics
While there has been deafening noise around the lapsed Provident Financial (PFG) bid, the fundamental outlook for NSF is unchanged. It still has the market-leading network in unsecured branch-based lending and is number two in guarantor loans, both growing strongly. It is number three in home credit. The direct costs of the bid were ca.5% of NSF’s market capitalisation and we estimate a further disruption/ extra finance effect of 2%- 3%. This may be compared with a share price fall of 28%. Delivery of consensus earnings and franchise growth expectations will be the
17 Jun 19
Business as usual
On 4th June 2019, Non-Standard Finance (‘NSF’) took the difficult decision to lapse its allshare offer for Provident Financial (‘Provident’) following a ruling by the Prudential Regulation Authority (PRA) on the capital treatment of minority interests, which would have left the combined business undercapitalised at the point of completion. While the combination of these two businesses had had a compelling strategic logic, the standalone outlook for Non-Standard Finance remains an attractive one, in our view. This reflects the strong growth potential of the group’s branch-based lending and guarantor lending operations, combined with the cash generative nature of the more mature home credit operation. Trading on a 2019F PER of just 7.2x with a dividend yield of 7.0%, we believe the valuation remains attractive on both an absolute and relative basis (versus quoted peers). Our revised fair value is 75p (75% upside). HOUSE STOCK
12 Jun 19
The Monthly April 2019
Although the focus of Hardman & Co is predominantly on companies in the smallto mid-sized market capitalisation range, when writing research reports, it is important to position them relative to the industry in which they operate. Apart from Japanese companies, all the major global pharmaceutical companies have reported full-year results for 2018 over the past few weeks; therefore, we have taken the opportunity to update our industry database and generate the first cut of global rankings for 2018. For an industry that requires a long investment cycle – it still takes, on average, 10 years from discovery to launch of a new drug – decisions made many years ago have important consequences on current financial results. Therefore, looking back at operational performance over 20 years reveals how different company strategies have panned out.
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03 Apr 19
LIBERUM: Best of the Week: Financial Services In-Depth, Strategy Monthly:All-Cap and SMID, Melexis, Shield Therapeutics
The week's most insightful research and ideas. Liberum's most insightful and high-value research and commentary published this past week.
NSF PMI AFHP BRW AQX IGG PLUS CTR CPP SNN XPS BUR GLIF RFX MELE STX BDEV BWY BKG VTY CRST GLE PSN TW/ UMI NESN AZN RB/ RDW GFRD
22 Feb 19
LIBERUM: Financial Services - UK sell-off has created opportunity
Reviewing a range of diversified financial services companies in the UK, we see a group of businesses that are relatively capital light, with many offering a strong mix of large growth potential and recurring revenues. These are businesses that make their own futures – not macro or interest rate plays.
NSF PMI AFHP BRW AQX IGG PLUS CTR CPP EQN SNN XPS BUR GLIF RFX
20 Feb 19
THE MONTHLY February 2019
This Investment Research Paper addresses the issue of renewable power generation in the UK and in mainland Europe, which – after the deep-seated financial crisis of 2008/09 and the ensuing recession – now has better prospects of achieving critical mass. It also considers investment perspectives.
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05 Feb 19
THE MONTHLY January 2019
The Hardman & Co Healthcare Index (HHI) has been running since 2009. Its main function is to highlight the attractions of life sciences investments over the long term. 2018 was a difficult year; however, the index still outperformed its comparative London indices, falling 10.0% to 393.2, compared with -13.0% and - 18.2% for the Allshare index and the AIM index, respectively. Furthermore, several (17) companies in our index increased their capital base – 15 of our 50 constituents raised new funds, two issued shares as part consideration for acquisitions, and two had share buybacks – all factors that influence the performance of the index. Even allowing for both capital increases and share buybacks, the 12.5% fall in the index still represented a modest outperformance compared with the decline in the Allshare index. With active industry consolidation, shareholder returns remain attractive.
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11 Jan 19
LIBERUM: Non-Standard Finance* - Everyday Loans CMD - a high growth, low risk, well-run business
NSF will trade to at least 9x 2020, and the earnings growth between now and that year is the foundation of our thesis, but time with the management of its largest business has shown us and others that Everyday Loans is a properly exciting growth story, with more levers to pull than we had previously appreciated.
06 Dec 18
Reading the runes: strong, controlled growth
On 3 December, NSF held an investor day at the Reading branch of Everyday Loans (EL) and its head office in Bourne End. Investors and analysts thus got the opportunity to see the front-line operations and review the company’s strategy. The former confirmed our view on the competitive advantages of a branch network and the operational synergies from being part of a group. The presentation confirmed the long-term, controlled growth opportunity from a business with an excellent market positioning and sustainable competitive advantages. We have not changed our forecasts following the update, and our absolute valuation range remains 91-101p.
05 Dec 18
LIBERUM: Non-Standard Finance* - 3 great businesses, 1 wrong price
Non-Standard Finance lends to a select subset of the many in this country whose poor credit score or thin credit history makes access to credit very difficult. It is emerging from recent regulatory and accounting changes as a high growth business, with high risk-adjusted margins, but trades at a very low multiple with a big yield.
21 Nov 18
THE MONTHLY November 2018
In addition to Hardman’s monthly analysis of client stocks, the thorny issue of market disruption – a popular theme currently - is also addressed. In a wide-ranging article, Hardman’s utilities analyst, Nigel Hawkins, assesses the impact that market disruption has already made. In some sectors, notably telecoms and aviation, market disruption has been apparent for many years, as the rise of Vodafone, Ryanair and easyJet demonstrates. However, in some sectors, such as oil and housebuilding, structural changes have been modest – the dominance of the big players endures. For investors, there is real interest in those sectors where changes are underway. The UK groceries market, which may shortly become a duopoly, is a case in point. And, intriguingly, who knows if there is a company currently languishing in AIM, which will attain a £50bn market valuation within the next decade?
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06 Nov 18
THE MONTHLY October 2018
We are in the midst of the Conference season for political parties and trade unions in Britain. We all have a lot on our minds, with generational constitutional issues to the fore, but these have come to the fore after many years of concerns building up about citizens’ ‘place in the world’.
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04 Oct 18
The Monthly September 2018
September’s Hardman Monthly features an article from guest contributor, Tim Ward. Tim is the Chief Executive of the Quoted Companies Alliance (QCA), an organisation that champions the interests of small to mid-size quoted companies.
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03 Sep 18
1H’18 results: jam today, more tomorrow
NSF invested heavily in 2016 to 1H’18, deferring the delivery of greater bottomline profits. The 1H’18 results delivered tangible payback on this investment, with normalised operating profits up 79% (statutory operating profit moved from a loss of £1.1m to a profit of £7.0m). Pre-tax profits were held back by the group locking in long-term, more expensive, funding (finance costs £9.6m vs. £3.1m) but, as these funds are deployed, pre-tax profits are expected to rise. We reviewed Everyday Loans (EL) in "A heart of gold". We believe the re-pricing and volume opportunities that NSF have in a downturn provide it with counter-cyclicality.
09 Aug 18
Hardman & Co’s analysts have direct experience of uncovering accounting frauds. In this article, Steve Clapham outlines why we might see a surge in them over the next few years. He is engaged by institutions to teach their fund managers and analysts how to identify risks brought about by such frauds. Hardman & Co is pleased to offer this service to private investors.
NSF OPM AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GDR INL KOOV MCL MUR PHP RE/ REDX SCLP SCE SIXH TRX TON VAL W7L OXB
01 Aug 18
We have analysed every IPO on the London Stock Exchange (LSE) between January 2015 and February 2018. Our analysis proves that, as expected, liquidity does dry up after float. The scale varies between markets and sectors.
NSF OPM AGY ARBB AVCT BNO CMH COS DNL EVG GTLY GDR INL KOOV MCL MUR PHP RE/ REDX SCLP SIXH TRX TON VAL W7L OXB
29 Jun 18
1H’18 preview: costs 1H-weighted, revenue 2H
We preview the 1H’18 results due in early August. The 18 June trading update confirmed trading was consistent with FY guidance, but we think investors should recognise the split between 1H and 2H. We forecast that NSF will deliver 46% of FY’18 revenue in 1H’18 and 46% of impairments, but 50% of costs and 49% of finance costs; thus, we estimate 18% of group 2018 PBT in 1H’18 and 82% in 2H’18. The revenue split reflects business seasonality and payback for investment. Impairments reflect IFRS9 taking more provisions upfront when loans are added. Costs reflect the timing of investments in each division, operational normalisation in EL, and guarantor loans synergies. We make no changes to 2018 estimates.
26 Jun 18
Hardman & Co recently welcomed Milan Radia to our roster of established, industry expert analysts. Milan has 25 years of equity market experience at major investment banks and in asset management, and has worked on many high-profile successful IPOs. In 2017, he was ranked the No.1 earnings estimator in the UK for his sector in the Thomson Starmine Awards. Milan has also been techMARK Analyst of the Year and achieved top three Institutional Investor sector rankings for his coverage of the software and telecoms sectors. In our lead article this month he gives an insight into his thinking on some key themes in the sector.
NSF OPM ABZA AVO AGY APH ARBB AVCT BNO BUR CMH CLIG COS DNL EVG GTLY GDR INL KOOV MCL MUR YGEN PHP RE/ REDX SCLP SCE SIXH TRX TON VAL OXB
04 Jun 18
Everyday Loans: a heart of gold
The 14 May trading statement confirmed that all the 2017 trends have continued, leaving our strong growth forecasts unchanged. Rapid loan growth has been seen in each division, impairment continues to be in line with previous guidance (i.e. tightly controlled), and investment continues. In this note, we review the heart of the group, Everyday Loans (80% of 2017 normalised operating profits, 60% of net loan book and 50% of revenue). We believe it has strong competitive advantages in sales, costs and credit, and it has multiple levers to deliver sustainable earnings through an economic downturn. NSF’s 2019E P/E of 9.6x is an anomaly with its growth and profitability outlook.
14 May 18
Prior to the financial crisis of 2008/09, it was widely believed in the stock market that certain sectors – most notably utilities, pharmaceuticals, food retailing and tobacco – were far less vulnerable to market downturns.
NSF OPM ABZA AVO AGY APH ARBB AVCT BNO BUR CMH CLIG COS DNL EVG GTLY GDR INL KOOV MCL MUR YGEN PHP RE/ REDX SCLP SCE SIXH TRX TON VAL OXB
02 May 18
LIBERUM: Non-Standard Finance* - Forecasts updated; maintain BUY
Having reflected IFRS 9 in our forecasts, which has a relatively greater impact on higher growth, higher risk-adjusted margin businesses like NSF, the company still screens very attractively, on growth, income and valuation. Our 83p TP implies a 29% TSR and a CY19 P/E multiple of 11.6x, for a business which should deliver a 29% CY17-19 EPS CAGR and a 1.8x covered, 6% CY19 DPS yield.
19 Apr 18
This month’s feature article is the first publication of the 2017 global pharmaceutical industry statistics from which the global and US rankings of the top 15 drug companies are derived. Comparisons are made with historical data to show how different company strategies have evolved. In addition, an analysis of the evolution of biopharmaceuical drugs has been made, together with a key sub-set, namely drugs derived from antibody technology, which now represent 12% of the entire market. Two more drugs joined the $100bn club in 2017.
NSF OPM ABZA AVO AGY APH ARBB AVCT BNO BUR CMH CLIG COS DNL EVG GTLY GDR INL KOOV MCL MUR WBI YGEN PHP RE/ REDX SCLP SCE SIXH TRX TON VAL OXB
04 Apr 18
Strong profit growth path confirmed
Until the F2017 results, NSF was, to a certain degree, a ‘jam tomorrow’ story, with infrastructure investment holding back returns. This is significantly complete and, with its market-leading franchises and payback from historical investments starting to come through, its target 20% EBIT ROA and minimum 20% loan book growth should start to be achieved in 2018 for Loans at Home, and in 2019/20 for the other divisions. Rolling forward the valuation base year has a big effect due to the strong forecast profit growth (2019E P/E ca.10x vs. ca.17x 2018E). The average of our absolute measures (see assumptions in valuation section) is now 101p.
27 Mar 18
In the March 2018 edition of the Hardman Monthly Newsletter, Nigel Hawkins addresses the attractions of quoted infrastructure funds that maintain a low profile.
NSF OPM ABZA AVO AGY APH ARBB AVCT BNO BUR CMH CLIG COS DNL EVG GTLY GDR INL MCL MUR WBI PPH YGEN PHP RE/ REDX SCLP SCE SIXH TRX TON VAL OXB
02 Mar 18
In the February 2018 edition of the Hardman Monthly Newsletter, Nigel Hawkins addresses the issue of the UK's infrastructure expenditure, much of which is energy-related.
NSF OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GTLY GDR INL MCL MUR WBI PPH YGEN PHP RE/ REDX SCLP SCE SIXH TRX TON VAL OXB
01 Feb 18
LIBERUM: Non-Standard Finance* - EPS forecasts trimmed post update
NSF's pre-close update indicates that Everyday Loans and Guarantor Loans are performing in-line to slightly ahead of our expectations. However revenue growth at Loans at Home was held back by the strong 53% y/y net loan book growth occurring later in the quarter than the company expected. As a consequence, we reduce our EPS forecasts by 4-5% through our forecast horizon. Nonetheless NSF remains a compelling high growth story. Our 94p TP implies a 29% TSR and a CY19 P/E multiple of 11.1x, for a business which should deliver a 44% CY17-19 EPS CAGR and a 2x covered 6% CY19 dividend yield. BUY.
15 Jan 18
The latest Office for National Statistics (ONS) survey, ‘Ownership of UK quoted shares: 2016’, shows that retail investors are more important than most company managements realise or most capital markets professionals admit. When it is also appreciated that the data shows that retail investors set the share price for most quoted companies, most days, it becomes clear that engaging with such an audience enhances a company’s standing, whilst ignoring them courts disaster.
NSF OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GDR INL MCL MUR WBI ODX PPH YGEN RE/ REDX SCLP SCE SIXH TRX TON VAL OXB
09 Jan 18
Loan growth, better impairments, more investment
NSF’s Capital Markets day provided investors with a lot of detailed information on the business and highlighted three key themes. The detail is available from the presentation NSF Capital Markets Day. In this note we explore in more detail the key themes of (i) loan growth ahead of expectations (ii) improving asset quality and (iii) further accelerated investment. The net effect is a reduction to 2017/18 estimates, driven by investment, although we expect consensus 2019 to rise. The accelerated investment shows management confidence in the macro-environment (low incomes growing ahead of inflation) and its business model.
07 Dec 17
LIBERUM: Non-Standard Finance – Initiation - Standout growth, high income
Non-Standard Finance (NSF) is a diversified lender in the UK non-prime unsecured space with an impressive growth trajectory ahead of it. The Group offers branch-based personal lending, home collected credit and guarantor loans and benefits from a very experienced mgmt. team.
06 Dec 17
The Monthly October 2017
In the October edition of the Hardman Monthly newsletter, Chief Executive, Keith Hiscock analyses the much misunderstood – but highly important – issue of stock liquidity. In particular, he focuses on the lower echelons of the Main Market and of AIM.
NSF OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GTLY MCL MUR WBI ODX YGEN PHP PURP RE/ RGD SCLP SPH SCE TRX VAL OXB
02 Oct 17
The Monthly September 2017
In the September edition of the Hardman Monthly Newsletter, Dr Martin Hall - based partly on his personal experiences as a long-standing investment analyst - addresses various accounting issues that are highly relevant to today's investors. In particular, he concludes that measuring company cash flow - and especially projecting future cash flows - is pivotal to undertaking rigorous financial analysis, irrespective of how individual companies may present it.
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04 Sep 17
H117 Delivering multiple growth options
NSF’s H117 results give greater visibility on further franchise and profit growth. The branch network has opened 8 branches already this year (now 49). The home collect business recruited 229 experienced agents in H117 (and a further 124 in July, up 25% on end 2016). The guarantor business has been quadrupled by acquisition, offering broader products and distribution. The group has also locked in funding for six years thus reducing financing risk in uncertain times. We expect profits from the franchise growth to more than offset further investment and higher funding costs. Our 2018e earnings estimates have been increased by 3%.
11 Aug 17
The Monthly July 2017
As we approach 3rd January 2018 and the coming into force of the MiFID II legislation which changes the landscape for research, we are beginning to see some of the practical implications and complications. Brokers are in the early stages of working out how to structure charging for research, asset managers have already begun cutting their brokers’ lists and a model code of conduct for Research Payment Accounts for institutions has been published.
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03 Jul 17
Despite the calling of a General Election for June 8th, the FTSE-100 continues to perform strongly, partly on the back of Wall Street and encouraging corporate figures. Since the surprise Election was called on April 18th, the FTSE-100 has advanced by over 5%. There has been no sign of political nerves as is normally the case with opinion polls conveying mixed messages.
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02 Jun 17
After much heralding, MIFID II is finally beginning to have an impact on the business of investment research, though its true ramifications might take years to be seen. The role of analyst research is widely misunderstood. It is not all about the conclusion: the rating and price target. The real content of research is about what is discounted in the current share price and what assumptions would produce different outcomes.
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03 Apr 17
Branching Out Investment accelerated
NSF is accelerating the investment in its branch network, doubling the rate of new office openings 2017/2018 compared with previous expectations. We believe the company’s plans to staff these offices by experienced managers are credible. In home collect (HCC) NSF now has a model to fully exploit the opportunity from the market leader’s re-focus. 19% of Trusttwo new loans in December were from intragroup referrals, up from zero in June. Our estimates have been cut to reflect investment and a more measured risk appetite in HCC through 2018. We believe there is significant opportunity from switching PFG agents and will review forecasts once the scale of the transfers is clearer
13 Mar 17
Hardman & Co Monthly: March 2017
Most major pharmaceutical companies have reported results for 2016 during the last few weeks, providing the opportunity to update our industry statistics. For an industry that requires a long investment cycle, decisions made many years ago have consequences on current financial performance. Being able to look at performance over 20 years highlights how strategic decisions have panned out.
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01 Mar 17
The Quest for Dividends
The Dow Jones Index has just breached the 20,000 mark, the first time in its 131- year history that it has done so, whilst the FTSE-100 Index has also been at record levels in recent weeks. The election of the controversial Donald Trump as the new US President, and more specifically the impact of his planned expansionist economic policies, have boosted stock markets, both in the US and in the UK.
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01 Feb 17
The Monthly January 2017
Despite all the hullaballoo of the Brexit vote and the subsequent election of Donald Trump as the next US President, the UK stock market prospered last year, especially in the latter few months of 2016. The combination of a depreciating currency – making $ earnings more valuable in relative terms - and the Trump emphasis on infrastructure expenditure drove the stock market higher
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09 Jan 17
In the UK, unsecured, non-standard lending market, NSF has the market leading network in branch-based lending, is number three in home credit, and has a scalable platform in the growing guaranteed loans market. It’s medium term targets of 20% loan book growth and a 20% pre-tax return on assets look credible. NSF is under-geared and existing debt facilities will finance our projected growth through to mid-2018. Management is using technology to improve efficiency while not compromising the core personal relationships which are critical to managing credit. Our valuation methodologies indicate c67% upside.
11 Nov 16