Arrow Global Share Discussion Threads

[cestnous] 07/3/2014 09:02

Stemis
My SCSW portfolio is 116% up. There is nothing wrong with their research. I would certainly be following their opinion more closely than an anonymous bulletin board poster who does not even own shares in ARW. Perhaps you should concentrate your attentions on stocks that you do think will rise in price.

[stemis] 07/3/2014 08:49

Nurdin - the company's statement would be true whether the share price was 50p, 350p or £10. It doesn't really inform the investor as to whether ARW is under or over valued. The price of ARW will be determined by institutions not IC or tip sheets like SCSW (both of whose research is pretty worthless). Institutions aren't really going to be swayed either by buy recs or share price targets from brokers. They'll make their own minds up.

[cestnous] 07/3/2014 08:40

From I.C. today;

Arrow in the air
Arrow Global (ARW) buys distressed debt portfolios from mainstream lenders, and has been growing fast. That's largely because it is accumulating loan books, and the earnings streams that come with them, faster than the loans are expiring. So underlying operating profit jumped 59 per cent during 2013 to £52.8m and customer accounts grew 42 per cent to 5.1m.

The group's systems for managing borrowers in default also leaves it far better placed than mainstream lenders to boost collections from the portfolios it buys. Broker Numis Securities reckons that Arrow typically boosts paying customers in an acquired portfolio by 50 per cent, despite the vendors having already worked hard on the accounts prior to disposal.

Management reckons there are plenty of portfolios left to buy, even though it spent £101m last year buying portfolios with an aggregate face value of £1.37bn. That's mainly because banks are under regulatory pressure to boost capital, and offloading non-performing loans in order to write back provisions is a good way to do that. Another source of growth could be expansion overseas or into new sectors. The group already has a presence in Portugal and, longer-term, Arrow could focus on student loan-books.

Numis expects adjusted EPS of 16.9p for 2014 (2013: 14.7p), rising to 20.3p in 2015, with a 2014 dividend of 5.25p.

ARROW GLOBAL (ARW)
ORD PRICE: 255p MARKET VALUE: £445m
TOUCH: 255-259p 12-MONTH HIGH: 278p LOW: 216p
DIVIDEND YIELD: NIL PE RATIO: 26
NET ASSET VALUE: 60p NET DEBT: 170%
Year to 31 Dec Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2010* 20.0 -2.0 -0.2 nil
2011* 49.9 6.2 0.5 nil
2012* 65.8 12.1 7 nil
2013 94.7 21.0 10 nil
% change +44 +74 +43 -
Ex-div:-

Payment:-

*Prior to flotation

IC VIEW
The shares have risen solidly on October's 205p flotation price to trade on 15 times 2014's forecast earnings. That's not pricey for the financial-services sector and doesn't reflect the impressive growth profile. Buy.
Last IC view: na

[nurdin] 06/3/2014 16:39

So what do you make of the statement the company has made ...my post 547 ?

[nurdin] 06/3/2014 14:26

Where is everyone? Have you all jumped ship? :o)

Stemis..I think you have scared off most holders lol

[nurdin] 06/3/2014 11:13

"Looking forward, our strategy remains to grow the business whilst maintaining a strong focus on underwriting discipline and portfolio returns. We will therefore focus principally on EPS growth and ROE as the key financial measures by which we will manage the business."

I am sure the company has a better understanding of the business than we do ! :o)

[stemis] 05/3/2014 21:20

But the figures don't seem to bear that out. If I thought ARW were achieving that then it would certainly affect my view of valuation......

[nurdin] 05/3/2014 15:57

Arent they simply saying that they can boost the number of paying customers by 50% compared to when they they first acquire the debt? This maybe done through for example, by offering attractive payment terms to non paying customers?

[stemis] 05/3/2014 15:22

Broker Numis Securities reckons that Arrow typically boosts paying customers in an acquired portfolio by 50 per cent, despite the vendors having already worked hard on the accounts prior to disposal.

I don't really understand this comment. When ARW buys a loan portfolio is has an estimate of what collections it will receive (the ERC - Estimated Remaining Collections). In 2013 it paid 44p for every £1 of 10 year ERC. According to the Q3 results "If the forecast portfolio collections exceed initial estimates, a portfolio basis adjustment is recorded as an increase to the carrying value of the portfolio and is included in income from purchased loan portfolios."

In 2013 this adjustment was £4.8 million and 2012 was £1.2 million. They represent 4% and 1% respectively of collections in the two years. Hardly 50%.

[cestnous] 05/3/2014 10:14

When you do, let me know Nurdin.:¬)

[nurdin] 05/3/2014 10:12

Thanks for that Cest.It is interesting that none of the tipsters talk about valuation and focus primarily on PE.( A better metric imo is EV/EBITDA which stands at 7 for the year just gone and that looks cheap.)This measure atleast takes debt into account but as with the pe measure perhaps fails to address other parameters such as ERC,cashflow and such like.One day I will crack it and find an appropriate metric lol !

[cestnous] 05/3/2014 08:41

From I.C. Yesterday

Arrow in the air
Arrow Global (ARW) buys distressed debt portfolios from mainstream lenders, and has been growing fast. That's largely because it is accumulating loan books, and the earnings streams that come with them, faster than the loans are expiring. So underlying operating profit jumped 59 per cent during 2013 to £52.8m and customer accounts grew 42 per cent to 5.1m.

The group's systems for managing borrowers in default also leaves it far better placed than mainstream lenders to boost collections from the portfolios it buys. Broker Numis Securities reckons that Arrow typically boosts paying customers in an acquired portfolio by 50 per cent, despite the vendors having already worked hard on the accounts prior to disposal.

Management reckons there are plenty of portfolios left to buy, even though it spent £101m last year buying portfolios with an aggregate face value of £1.37bn. That's mainly because banks are under regulatory pressure to boost capital, and offloading non-performing loans in order to write back provisions is a good way to do that. Another source of growth could be expansion overseas or into new sectors. The group already has a presence in Portugal and, longer-term, Arrow could focus on student loan-books.

Numis expects adjusted EPS of 16.9p for 2014 (2013: 14.7p), rising to 20.3p in 2015, with a 2014 dividend of 5.25p.

ARROW GLOBAL (ARW)
ORD PRICE: 255p MARKET VALUE: £445m
TOUCH: 255-259p 12-MONTH HIGH: 278p LOW: 216p
DIVIDEND YIELD: NIL PE RATIO: 26
NET ASSET VALUE: 60p NET DEBT: 170%
Year to 31 Dec Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2010* 20.0 -2.0 -0.2 nil
2011* 49.9 6.2 0.5 nil
2012* 65.8 12.1 7 nil
2013 94.7 21.0 10 nil
% change +44 +74 +43 -
Ex-div:-

Payment:-

*Prior to flotation

IC VIEW
The shares have risen solidly on October's 205p flotation price to trade on 15 times 2014's forecast earnings. That's not pricey for the financial-services sector and doesn't reflect the impressive growth profile. Buy.
Last IC view: na

[ramridge] 05/3/2014 08:36

Guys. Like you I am still puzzled why the market is pricing this share down following what appears to me sparkling results. One thing I noted was a large exceptional item of 8.6m which has resulted in depressing the net profit and the eps figures to levels below broker forecasts. A large element of this item is 4.4m of 'share option charges' . My reading of this is management filling up their boots at the detriment of other stakeholders. Or I am barking up the wrong tree?

[bartolozzif] 04/3/2014 15:56

PANMURE


Arrow Global Group


BUY TARGET 335p



FY13 results
The results were overall a little better than expected, though the IPO was very
recent. The outlook is for further growth in the debt purchase market and
investment. The shares remain attractively valued versus our price target of
335p, with the short term overhang from the 29% held by an RBS fund
(unlocks in April).
 A djusted post-tax profit was £25.2m (£11.2m) with EPS of 16p (7.2p) versus our
forecast of 14.2p. No dividend has been paid for FY13 as guided (initial one at interims
this year). The underlying ROE was 26.5% (13.9%). The IRR was virtually unchanged at
22% for 2013 (23% historically).
 P urchases of loan portfolios in FY13 totalled £101.3m in line with guidance (£83.9m)
with a face value of £1,370m and total face value of loans increased to £7.2bn, and
including external assets to £9.6bn. 84 month ERC rose to £564m (£464m). Owned
customer accounts increased to 5.1m (3.6m).
 C ore cash collections were in line at £127.8m (£88.7m) +44% representing 103% of
plan, adjusted EBITDA £89.6m (£61.9m) +44% with an adjusted EBITDA margin of
70% unchanged. The cost to collect ratio was unchanged at 22%.
 T he company expects to grow investments at or in excess of the market rate in the
current year, weighted to the second half. They feel well prepared for the FCA takeover
of regulation in April. For FY14 we are looking for new investments of £115m and 84
month ERC of £700m. There is potential for earnings upgrades over time.
 T he shares were priced at IPO at 205p, rising to the 250p level before tracking the
overall market recently. We value them at 335p on a FY15 basis.

[cestnous] 04/3/2014 15:40

Just a few reminders from the SCSW rec to keep the faith;

"The analyst expects Arrow's shares (as do we) to rise as the story gets better understood and you only need to look at the charts for US peers Encore Capital (ECPG; US$49.6) and Portfolio Recovery Associates (PRAA; US$61.2) with bottom-left top-right share price formations to see it is a good augury."

"And this iceberg of defaulted bad debts available to buy is not getting much smaller. In the UK, £10 billion debt will be sold this year - an all time peak - but a stonking £8- £10bn fresh bad debt will be created. That's more than the previous £8bn record of bad debt sold in 2008."

"Collections are already showing signs of accelerating because banks are selling "fresher" data (i.e. the time elapsed since it defaulted is short) and the better economy also is helping with higher collections. As a result Arrow is more profitable than ever before with operating margins of 47.6%. In the year to 31 December 2012, Arrow doubled its pretax profit to £12.1m and it has already recorded a profit of £11.2m in the first six months of this year. We have yet to see forecasts as the company is fresh to market but the indication is the shares are on a prospective PE of 12x or even less, for the year about to start. A Strong Buy."

[cornishman33] 04/3/2014 15:33

One of only two reds on my screen today (ASW the other) after what I thought was a good statement. When SCSW napped this in January they described it as a 'staid business with high levels of predictability'. That's the sort of company I like, and with a dividend to come later this year I added a few on the dip at 246p.
So £2 here we come.

[nurdin] 04/3/2014 15:01

This is not friendly is it ?

[aishah] 04/3/2014 14:32

Major Shareholder RBS SO reduced their to 29% at float. Lock-up arrangements:

The Company and the Selling Shareholders have agreed,
subject to certain customary exceptions, to the following
lock-up arrangements:
• the Company has undertaken to the Underwriters,
during the period of 365 days from the date of
Admission, not to, without the prior written consent of
the Global Coordinator, issue, lend, offer, sell or
contract to sell, issue options in respect of or
otherwise dispose of, or announce an offering or
issue of, any Ordinary Shares;
• each of the Directors and Lewylang LP has
undertaken to the Underwriters, during the period of
24 months from the date of Admission, not to,
without the prior written consent of the Global
Coordinator, offer, lend, sell or contract to sell or
issue options in respect of or otherwise dispose of
any Ordinary Shares. Each of the Management
Selling Shareholders has also undertaken to the
Underwriters, to be bound by a lock-up on the same
terms, and for the same period, as the Directors and
Lewylang LP;
• each of the Directors, the Management Selling
Shareholders and Lewylang LP have agreed to be
bound by a lock-up in favour of the Major
Shareholder on the same terms as the lock-ups they
have given in favour of the Underwriters for a period
of 24 months or, if shorter, for as long as the Major
Shareholder has an interest in Ordinary Shares; and
• the Major Shareholder and the Investor Selling
Shareholders have each agreed to a lock-up in
favour of the Underwriters on the same terms as the
Directors and Lewylang LP, but for a period of 180
days from the date of Admission.

[bartolozzif] 04/3/2014 14:20

no RBS will sell in a vendor placement when this goes into the FTSE250 imho , at 290p my guess.


watch and learn from Lozzi!

[johnv] 04/3/2014 14:04

"RBS Special Opportunities fund with 29% which on a 6 month lock
in to 6 April".

Does this mean RBS cant sell any before 6Apr and then after are able to dribble their 29% holding onto the market? If so I cant see this going anyway yet.

[miavoce] 04/3/2014 12:47

'That we we...' should have said 'That way we...'

[miavoce] 04/3/2014 12:44

They are paying a divi at interims. Presume they are using cash at the moment to build a debt portfolio which is big enough to generate enough cash to fund both a divi AND the purchase of more debt. That we we get a constantly growing income stream and divi stream.

[stemis] 04/3/2014 12:39

Are they considering paying a dividend? I don't know. If the loan book really is worth 10 year ERC and they can buy a £1 of 10 year ERC for 44p (which is what the figures work out at) then why would shareholders want a dividend?