H&t Share Discussion Threads

[ymaheru] 20/3/2023 11:05

Thanks @THORPEMATT.

Here’s a snapshot of what’s in the note:
“As other small-sum, short-term lenders have withdrawn, H&T’s well-capitalised, low-risk proposition has unique growth opportunities, with the pledge book up over 50% in 2022.

The lessening of legitimate competition at a time of heightened demand means this increasingly dominant franchise is expected to fuel strong earnings growth”

Rising gold prices in last few days can only help, too. HAT’s gold margins soar when prices rise.

[thorpematt] 20/3/2023 10:00

Fabulous Brokers note from Hardman on H&T. Really good depth.

[laughton] 18/3/2023 14:35

Added a few more yesterday. Holders and potential holders appear to be missing what's happening with gold and silver prices. Looks like there must be some element of panic buying to me.

[lord loads of lolly] 17/3/2023 16:00

You did well. The day low so far is 431p Bid, 436p Ask. H&T's dividend growth & outlook should prevent this share from tanking, however volatile the wider market. Believe it goes ex dividend on 18 May.

[wad collector] 17/3/2023 15:40

Finally managed to add on this week's weakness at 433. Last week's figures were impressive.

[lord loads of lolly] 07/3/2023 16:44

I'd agree with their summary. Though always best to treat house brokers with caution, as they're usually clueless & always biased. But in this instance, I think it's fair to assume we'll get another strong set of results in a year's time from H&T.

[scotches] 07/3/2023 14:57

H&T Group PLC (AIM:HAT)’s house broker Shore Capital has responded positively to the pawnbroker’s preliminary results for 2022 which reported a 50.5% growth in the pledge book to finish the calendar year at £100.7mln with profit before tax of £19mln from £10mln in 2021

Noting strong numbers across all revenue lines, Shore Cap said “the outlook remains positive for the group’s pawnbroking and non-pawnbroking services”.

H&T’s “healthy” year-on-year dividend increase of 25% top 15p also got the thumbs up, with the house broker calling it a “progressive dividend policy with an at least two times cover target ratio”.

H&T’s balance sheet is “in good shape”, said the broker, despite a net cash surplus in 2021 flipping to net debt of £2.8mln in 2022.

Shore Cap noted that the net outflow primarily reflected new business strain due to strong growth in the pledge book, alongside increased retail inventories and the cash invested in the acquisition of Swiss Time Services.

Shore Cap’s fair value remains unchanged at 580p, equating to a 29% upside against the Monday closing price of 451p.

Three-year compound annual growth rate (CAGR) in earnings per share of 29%, with a dividend per share CAGR of 28%, is the latest guidance.

“H&T has been reinvigorated under the leadership of experienced chief executive Chris Gillespie, and we believe the group remains well positioned to capture further strong near-term growth opportunities presented to it in what is currently a favourable operating environment,” said Shore Cap.

[lord loads of lolly] 07/3/2023 14:18

Generally, H&T has managed its costs carefully in the past, so I wouldn't be unduly concerned. Chances are, they'd simply raise the interest rate on loan repayments to cover this, should rising costs persist.

[c3479z1] 07/3/2023 11:26

should we be concerned by the slight caution over staff costs? seems the age-old battle between capital and labour is turning in favour of the latter at the moment.

[taylor20] 07/3/2023 11:10

Nice explanation of how the pledges are treated in the accounts:

"Pawnbroking income is recognised as contractual interest earned on a pledge loan over its contractual maturity of 6 months, with interest accrued reflecting the principal outstanding and the effective interest rate, as governed by IFRS 9. Interest is charged on a daily basis, and no early termination penalties or fees are charged to the customer if the loan is repaid prior to its 6 month maturity.

International Financial Reporting Standards, IFRS 9, specifies how an entity should classify and measure a financial asset and requires recognition of impairment losses on a forward-looking basis, which means the impairment loss is required to be recognised before the occurrence of any loss event in the underlying pledge loan.

A pledge loan receivable is recognised on the day a pledge loan is granted. If a customer does not repay their pledge loan, no interest is recognised on this unpaid loan. A customer may alternatively elect to repay their pledge loan before its contractual maturity. Both instances will reduce the realised effective interest earned on the pledge loan versus the initial expected interest to be earned at the time when the pledge loan is granted.

The Group measures loss allowances for pledge loans using an IFRS 9 expected loss model, which considers the future expected interest income to be earned while considering the impact of redemption rates and repayment profiles.

Interest income is earned on the pledge loan over time, while IFRS 9 requires the estimate of future impairment to be recognised on the day the pledge loan is granted. This mismatch between the recognition of impairment costs and interest accrued is intensified in periods of growth, or reduction, in the underlying pledge book. The effect of the day one impairment charge incurred in 2022 has been to reduce the annual risk adjusted margin as the IFRS 9 loss allowance impairment provision grew to £12.4m (2021: £11.1m)."

[pugugly] 07/3/2023 07:52

Very quiet thread -
Excellent results:- Should be a strong bounce today (imo)

[thorpematt] 31/1/2023 20:56

4grandkids,
I agree it is secure (because you have the collateral). But I think you can "lose" the profit on the loan i.e the interest and so there is some accounting impairment applied.

Again, I ain't an accountant but this document

[...]

...(from HAT following the changes in 2018)describes it well. And it does detail that there is impairment alloted for pawnbroking.


As per my prior post, increased impairment is a timing issue and indicates increased loan book in HAT's case, so a good indicator of future revenues.

[4grandkids] 31/1/2023 20:14

HAT do not provide small unsecured loans so no current impairment.
Pawn broking is very secure. Minimal impairment

[thorpematt] 31/1/2023 19:06

taylor20,

I ain't no accountant, BUT: -

basically when the pledge book rises HAT is lending more money out.

Each loan comes with a credit risk. IFRS9 dictates that you MUST record an impairment charge against those loans in case you don't get them paid back. This is called Expected credit loss (or ECL).

Incidentally, the other thing that goes up when HAT is doing well is the debt (a bit like it does for banks). Both of these things are (contrarily) good signs for future profits.

simple terms:-


complex terms:-


One effect of all this is that your current profits are reduced by future possible impairments (this happens when your "sales" are rising, it unwindss when falling). Naturally in periods when loan volumes level off there is no net increase in impairment or decrease). Again counter-intuitively increased impairment due to rising pledgebook is a good sign.

[taylor20] 31/1/2023 16:35

It was this line in the Interims that I wanted to understand:

"The growth in the pledge book was the driver of a net increase in impairment charges as required by IFRS 9, of GBP6.7m (H1'2021: GBP1.7m), which reduces reported profits in the short term."

[ymaheru] 31/1/2023 15:42

Hi Taylor20, I don’t know if it’s either if those things.

They were doing short term unsecured loans (payday lending), and I think most impairments came from that. So much so that I didn’t think it was a valuable business at all.

A lot of those loans are probably still outstanding, so that is what the impairments could be. I don’t know for sure, though.

[tole] 30/1/2023 20:12

https://masterinvestor.co.uk/latest/ht-group-trash-or-treasure-2/

[thorpematt] 28/1/2023 18:38

House Broker shore capital markets has these figures for the next 2 years. The divi payout ratio is based on a 40% payout ratio (so more than twice covered).

2023 estimates
PBT 32.6
EPS 57.9
Divi 23.0p


2024 estimates
PBT 39.2 £M
EPS 69.69
Divi 28.0p

Forward yields by my calculation are 5.3% and 6.5% at the current share price.

PE ratios are: 7.4 and 6.2

So, yeah I'd call that a value stock....but also ithas growth metrics which depending on your measures could be about 20% y-o-y.

[lord loads of lolly] 27/1/2023 18:13

asagi - see 18 Jan post below for one broker’s 2023 forecast. They could be wrong of course, but there’s little doubt current year results will be strong when published in March.

[asagi] 27/1/2023 11:26

does anyone know what the EPS forecasts are here please?

Asagi (no position)

[lord loads of lolly] 25/1/2023 09:54

Thanks scotches. Questor's conclusion in this Telegraph piece is that HAT is a hold at its current price. But that's just one opinion and media tipsters don't always get it right. Far from it in fact. Personally (barring any further global or UK-specific black swan events for now), I expect HAT to exceed 550p at some stage this year. At which point, I'd be looking to reduce my holding somewhat.

[scotches] 24/1/2023 10:40

....pawnbroker H&T. The shares have already gained almost 40pc since our initial tip in August 2019, with dividends on top, and the £199m stock still ticks a lot of the right boxes: a strong competitive position, as the leader in its field in a fragmented market; ongoing investment in that competitive position, in the form of new store openings and a new IT and point‑of‑;sale system; a sound balance sheet; good interest and dividend cover; and an undemanding valuation, since the shares trade at 13 times forecast earnings and come with a 3.3pc yield.