Pcf Share Discussion Threads

[gingerplant] 02/1/2018 10:47

This looks pretty good value to me – but given the 2/3rds holding by Somers, it’s difficult to see an outer, so you’re left with the yield and hopefully a steadily rising NAV with the share price following. But NAV now is 18.2p, so it’s clearly being valued (and not unreasonably so…) on a combination of earnings and assets – and lowly at that.

Nevertheless, this would seem to be all about the yield to me as a reason to buy. Brokers’ forecasts (Stockdale) are for a divi of 0.3p this year, 0.4p next – so a most optimistic case of 1.4% at the current buy price.

OTOH, there’s a stated intention to “operate a progressive dividend policy moving forward” but it’s still not valued as attractively on the basics as some of the big clearing banks including Lloyds & Barclays. Of course, it has the potential to run much faster – but they’re also going to be more exposed to any slowdown.

All in all, I can’t decide! :-)

[cc2014] 19/12/2017 13:43

Some interesting volume today.

[cc2014] 18/12/2017 13:24

Finally we seem to have cleared out the stock which was sold at 27.0 and the 6 MM's are lined up on the bid at 27.

Second line financials looking much stronger of late as does FTSE so let's see where we go.

[cc2014] 15/12/2017 09:59

Price seems to be holding up despite this string of sells. In fact the price to actually buy shares appears to be rising suggesting maybe a buyer in the background soaking up all the shares being sold?

[topvest] 13/12/2017 20:44

Yes, presentation quite interesting. Thanks for posting. Hopefully good steady growth to come over the next few years.

[netcurtains] 13/12/2017 12:21

It needs people to awaken their imaginations... Its not all about numbers - its about being a market disrupter... PCF have got themselves in to toffs banking party, now its time to find a good place on the main table and light up the cigar.

[cc2014] 13/12/2017 10:22

I don't think this stock needs ramping anyway. Just a bit of patience. People will discover it sooner or later. All the information required is in the presentation

[yupawiese2010] 13/12/2017 10:02

Dec results Presentation.

[netcurtains] 12/12/2017 20:06

look whose talking. Of course PCF is a great investment. We're all here ... That is its own story.

[topvest] 12/12/2017 19:28

Netcurtains: You are lowering the tone on this BB. Lets have a sensible discussion please with comments that add value rather than just endless ramping.

[netcurtains] 12/12/2017 09:39

DTE: You mean PCF have a great PE ratio AFTER taking off net assets!!! WOW. What would the PE ratio be if you added back the net assets???
This baby can only go one way - provided there is not some super secret out there we are not aware of.

[dan_the_epic] 12/12/2017 06:19

Why would you look at a PE multiple after taking off net assets? That's only useful if those net assets are not used in financing the business (e.g. entirely surplus property)

[netcurtains] 11/12/2017 22:09

Interest rates are rising in the USA - UK next. This can only be good for banks generally and PCF should coin it more than most!
Go on son - get in there!

[topvest] 11/12/2017 18:17

Only big risk is higher bad debts, but they should do ok. They may be prime but don't kid yourself that the default rate won't increase in the next recession. It will! Their customers are obviously not that prime or else they would not be borrowing at the rates PCF charge. Still happy to hold, but more through the Utilico connection than anything else as they are reasonably smart investors.

[cc2014] 11/12/2017 17:47

88k buys today vs 102k sells.

Looks to me like the three 25k sells all came from the same party as the timing of the trades is very close.

No stock left to buy at 28.0 and buyers now paying 28.6 so hopefully if the 25k seller has finished we can move up.

[the big fella] 11/12/2017 10:23

Excellent post CC

[cc2014] 11/12/2017 10:10

PCF has two areas of business split roughly 50/50:
1. Lending to consumers for cars
2. Lending to business for vehicles, plant and equipment

It has historically funded the lending through the wholesale market and retained earnings but around March became a bank and since then is shifting from the wholesale market towards retail deposits on fixed rate bonds. This significantly reduces its costs long term (or improves NIM – net interest margin) but this has not yet showed up in the finance figures as it’s only been a few months and there have been set up costs to becoming a bank.

It currently has a portfolio size of £146m, which grew by 20% last year and plans to increase this to £350m by 2020 and £750m by 2022. The banking license and being able to take retail deposits is the trigger for this.

PCF currently has a market cap of £59.4m based on a share price of 28p per share, Net assets of £39.6m. If you run the P/E calculation based on underlying profits of £5m, corporation tax rate of 19% it gives a P/E of 14.7. The P/E calculation takes no account of assets though so it would seem better to look at this based on a multiple of future earnings.
On this basis the market capitalisation exceeds the net assets by £59.4m-£39.6m= £19.8m which is only 4.9 years profits after tax.


In summary my belief in this trade is based on:
1. The market cap is only 4.9 times current profits once existing assets are allowed for.

2. The 4.9 multiple is based on current profits. If the portfolio grows fivefold at an improved NIM then it’s clear the market cap will be higher than £59m. One could make an estimate of this. (Speculate a five bagger minimum?)

3. Although PCF have stated they have no plans to cross sell other products as a bank, they do have a banking licence. There is a thought in the back of my head that 5 years down the line, their ambitions will be different than they are today. The success of Shawbrook, Aldermore, OSB, PAG and the other challenger banks is bound to start to look attractive at some point in the future as the balance sheet strengthens.


But maybe there’s a reason the share price is so low? I’ve checked the following:
1. Are the directors credible? Who knows but I’ve met Scott Maybury the Chief Executive present at an investors evening and he seemed sensible enough to me. All the directors and non-execs have been buying shares over the last year which is always a good sign

2. Is the business plan any good? Rather unusually for AIM it’s set out and available on line in this documentation pages 7-11:

3. Maybe there will be a load of bad debts in the future? You can assess this yourself on page 12 in the above link. The bad debt write off charge has dropped from 5% in 2009 to 0.5% today and given high levels of employment I see no reason for this to worsen anytime soon. PCF only loan to prime credit customers and don’t do PCP and continue to pursue this policy and the percentage of business within the top 4 credit grades increased to 63% from 57% all year.

4.Maybe the government are going to investigate them for inappropriate lending? PCF are at the complete opposite end of the market to PFG only doing prime and no sub-prime but yet I suspect PFG is dragging down PCF share price by association.

5. Maybe the balance sheet hides a load of issues? Page 18 of the presentation is pretty clear. Of their £172m of assets, there is £2.7m of intangibles. I’m always suspicious of intangibles. In this case I suspect it’s the investment in the new banking software but whatever it is, it doesn’t really matter. Even if the £2.7m is actually worth nothing, it doesn’t affect anything as it’s negligible in size to the market capitalisation and future profits


I can’t find any skeletons in the cupboard other than general Brexit scaremongering. I will be holding long term. The presentations set out the strategy and gives me a high level of conviction this will be a multi-bagger, even thought it's already multi-bagged if you bought back in 2011

[the big fella] 11/12/2017 09:38

I suspect all they need to do at the moment to re-rate the shares would be drop an occasional loose reference to blockchain technologies or developing something in the cypto space and these would be a quid before you know it.

[cc2014] 09/12/2017 14:52

I'm struggling to understand why the share price is so low.

Underlying profit £5m. Market cap £59.4m, Net assets £39.6 of which intangibles are £2.7m.

So, P/E = 14.7 which is a little rich but that's before you look at the net assets of £39.6m.

If you re-run the calc as follow 59.4-39.6 = £19.8m, the company appears to be valued at net assets plus 4.9x future earnings per year.

Which seems far too low for even if you ignore the growth strategy.

Which is why I hold and will continue to so long term.

[netcurtains] 09/12/2017 09:53

geraldus: Yep basically they say expect to see SMALL dividend rise each year for a while. They are concentrating on the growth.
I'd say this looks a great investment going forward.

[geraldus] 09/12/2017 07:57

Very interesting stav,must be one of the best investor sections I've seen.Can see them moving into the online market for SME eventually although they seem to have plenty of options.

[stav13] 08/12/2017 18:39

There's a Q&A session on the investor section of the website, towards the end they mention capital requirements/dividends, may be of some interest !

[topvest] 07/12/2017 21:25

Well for what it's worth I think PCF Bank will be a steady earner from here. It's 3 bagged so far, and will no doubt get to the 40s at some point. Still think the dividend policy needs adjusting as its very poor. Look at S&U, Secure Trust or even Arbuthnot. Much better banks from that perspective and all are growing prudently. Non-Standard Finance on the other hand is growing in the wrong way and will probably fall over when the going gets tough as it surely will at some point.

[netcurtains] 07/12/2017 20:16

topvest: I invested in Triad as I know the developers who work there (I am a web developer). I invested in Wey because I love home school and I really feel it is the future of education (for too many reasons to go into here) and by the same token we all know that the banking sector is ripe for the picking - it just needs some bright young things to get stuck in and, if we're lucky, PCF might be in the right place at the right time.
But either way I dont have huge sums in it - so I can afford to lose the lot and not lose my smile.