Pcf Share Discussion Threads

[graham1ty] 20/2/2019 12:53

Looks like plenty of demand in the market at 32p++

[the big fella] 20/2/2019 12:03

At least folk are realising that as Wan pointed out earlier there is some good news hidden in there and reason to be optimistic going forward.

[graham1ty] 20/2/2019 10:41

Big fella, I agree. I have an enormous position and have every confidence in the team. And I thought most other people did. And I thought institutions did.

Which is why it gives such a negative vibe issuing down at this level.

I have a naive hope that the bookbuild will go well, and be massively oversubscribed, and they announce it was done at 32p. But that may be rosy coloured specs.....

[the big fella] 20/2/2019 10:34

Graham. Having been a large holder for some time I have to agree with your post. If sommers had agreed to 35p the market would have followed and the price would probably have risen given the lack of discount. This will continue to be a long term hold for me as I do think these will be a multiple of today’s price within a couple of years.

[graham1ty] 20/2/2019 10:30

I wish the company had waited until after the AGM. A decent trading statement, a boost to the share price, a rising market and they might have raised in the high 30s.

With Somers and BCB holding 66%, and taking up their entitlement, the actual raise from other shareholders is about £3.5m. Directors have said they will take up stock, so even less than that. If Somers had agreed a price at, say, 35p on the back of a solid trading statement, would not the market have followed ?

Everyone likes PCF and the team, and now there is a sour taste in the mouth

[wanbissaka] 20/2/2019 10:17

Indeed Graham, but when you read the small print in the announcement you can see that things are actually going very well indeed:

The Board is pleased to report that current trading is in line with management expectations. As at 31 December 2018, the lending portfolio had grown to GBP250 million and retail deposits stood at GBP203 million held across approximately 4,600 customer accounts. PCFG is targeting new business originations of GBP250 million in the year to 30 September 2019. Following strong portfolio growth supported by new business initiatives and the acquisition of Azule, the Group is ahead of schedule to meet its initial portfolio target of GBP350 million and a return on equity of 12.5 per cent. by 2020. The Directors are confident in the Company's business model and strategy as it continues to target a lending portfolio of GBP750 million and return of equity of 15 per cent. by 30 September 2022.

[graham1ty] 20/2/2019 10:12

Appalling level. This will set a marker at 30p which will take months to pull away from.

PCF was in the mid 40s last year, and since then they have announced they are about one year ahead of plans. This drags the share price down as if something is going wrong ?

[mark of the rushes] 19/2/2019 11:32

This is well worth watching.

[norbert colon] 16/1/2019 13:23

https://news.sky.com/story/atom-bank-hires-advisers-ahead-of-potential-spanish-bid-11607396Challenger banks may now be a target .

[cc2014] 16/1/2019 11:05

All the trade flow today is one way and I would assume the uncrossing trade at 37.2 means whatever stock one of the marketmakers had left has now gone.

It's not before time. LLOY is up for 10% in January and PCF closed at 35 on the bid at the end of December, so PCF is still playing catch up even after this morning rise.

[solarno lopez] 16/1/2019 11:05

is that a question

[geraldus] 16/1/2019 11:03

Atom Bank,challenger bank received a offer.

[wednesday6] 16/1/2019 10:44

A bit of interest being shown hera of late with some very decent size buys.

[norbert colon] 14/12/2018 13:40

https://www.investorschronicle.co.uk/comment/2018/12/10/challenger-bank-pcf-reports-record-results-and-a-bullish-outlook/?utm_campaign=Copy+of+ICDailyEmail_new2016&utm_source=emailCampaign&utm_medium=email&utm_content=

[topvest] 12/12/2018 18:45

The share price is likely to remain on a discount. The reason for this is that it is controlled by Somers which they themselves are controlled by Utilico. These are supportive long term holders and very much a positive, but the market never sees it that way. It gives PCF a discounted valuation versus truly independent peers.

[cc2014] 12/12/2018 17:02

I listened to the results presentation today. Why the share price is 37p is utterly beyond me.

Nevertheless it makes no difference to me as yet as I'm holding for the long term

[graham1ty] 12/12/2018 10:09

The IT costs etc are just part of the cost of being a bank. As long as the cost to income ratio keeps falling, I am happy. I don’t think the extra costs are excessive in any way. They have added new people ( Azule and the Bridge finance team) so costs will rise, but as long as cost to income falls, that shows it is reasonable.

On scaleability. PCF reported a £219m book with 73 staff ( now to add on Azule). In 2014 they had 46 staff and a loan book of £89m. They have increased the loan book by 150% with just 27 extra staff ( that is a pretty crude analysis, but you get my point).

In IFRS9 they have done all the modelling and suggest it will have next to nothing. I think there will be a whole section on this in the Accounts due out soon

[carcosa] 12/12/2018 08:16

Graham,

Do you have any concerns regarding the (necessary) bringing forward of IT costs, the impact of IFRS 9 and the somewhat unknown impact of Brexit?

[graham1ty] 12/12/2018 07:46

Another very good meeting with Scott yesterday. A class act.

If the market had not been so volatile recently PCF would be hitting new highs

[geraldus] 11/12/2018 20:14

I was impressed with the video.A very high level of integrity.

[yupawiese2010] 10/12/2018 16:18

video in respect of results presentation.

[cc2014] 10/12/2018 12:06

Tipped by Simon Thompson IC a few minutes ago

Aim-traded specialist bank PCF (PCF:36p) has delivered shareholders the bumper set of annual results I had anticipated when I included the shares, at 27p, in my 2018 Bargain Shares Portfolio. In fact, the company has overdelivered. PCF increased full-year pre-tax profits by 44 per cent to a record £5.2m, all of which was organic growth and beating house broker Panmure Gordon’s forecast by 7 per cent, to lift earnings per share (EPS) by a third to 2p and support a 58 per cent hike in the payout per share to 0.3p.

Having gained a banking licence in the summer of 2017, the challenger bank ended the financial year to 30 September 2018 with retail deposits of £191m, up from £53m at the same stage of 2017, from 4,500 bank customers who receive an average interest rate of 2.1 per cent on their money. PCF’s retail deposits have an average term of 2.5 years and by offering market-leading rates boast a high retention rate in the order of 70 per cent, thus providing a reliable low-cost funding source to ramp up the bank’s lending portfolio and target higher-quality prime customers.

PCF also tapped the Bank of England’s Term Funding Scheme before it closed in February, which has given it an attractive four-year line of credit at a base rate of 0.75 per cent. Other wholesale funding costs average 4.75 per cent a year and PCF ended the 12-month period with balances of £49m outstanding on them, down from £79m in 2017. Expect these wholesale credit lines to run down materially over the course of the coming year as they are replaced by cheaper retail deposits.

The bank’s loan book is growing strongly, too. Receivables increases by 50 per cent to £219m in the 12-month trading period, reflecting a 75 per cent rise in new business originations to £148m, of which 70 per cent is to the prime market. Around 60 per cent of the loan portfolio now represents loans to the small- and medium-sized enterprises (SME) market, principally for asset finance, and the balance is consumer lending. Interestingly, the company has been diversifying its customer base by targeting specialist markets within consumer finance, including lending on horse boxes and motor homes, a sensible decision given that these customers put down big deposits, have a good-quality asset and borrow for longer, around seven to eight years, according to PCF’s chief executive Scott Maybury. Around a third of the £62m new business originations in the financial year were from consumer specialist markets.

Importantly, the company has no exposure to Personal Contract Plans (PCPs) within its consumer motor finance business, nor lends to the subdued new car market, and is focused on lending into the far healthier used car market. The fact that the impairment charge was unchanged at 0.5 per cent of loan portfolio highlights a low level of delinquencies and underlines strict financial discipline in making lending decisions.



Diversifying the product mix mitigates execution risk

The post-period-end acquisition of Azule, a specialist funding provider to individuals and businesses in the broadcast and media industry looks a smart deal and one that’s immediately earnings enhancing. Initial consideration of £4.1m (split £3.3m cash and £800,000 shares) and performance-related earn-out of £1.5m equates to seven times Azure’s pre-tax profits of £800,000 on revenue of £3.1m in its last financial year. Azule has capacity to generate north of £50m-worth of annual asset finance originations with very low impairments given the nature of its lending. It’s well on its way to achieve that target as Mr Maybury says that since acquisition Azule’s "like-for-likes are very good and can do even better".

Mr Maybury also sees an opportunity to enter the direct to market property bridging finance market and is looking to achieve £20m of lending to this segment in the coming year. The risk weighting of property is lower than on its current lending lines, but it should achieve net interest margins of around 8 per cent, in line with PCF’s existing loan portfolio. Moreover, by limiting loan-to-value ratios to 70 per cent and taking a first charge on the client’s property, then the bank can protect itself from defaults and impairments.

The combination of originations from both of these new credit lines and ongoing strong new business originations from PCF’s business and consumer segments explains why Mr Maybury believes that his company can hit its £350m lending target one year ahead of the 2020 target date. On this basis, Panmure Gordon anticipates another step change in the profitability by pencilling in a 50 per cent hike in pre-tax profit and EPS to £8.1m and 3.1p, respectively, in the 12 months to the end of September 2019 to support a 33 per cent hike in the dividend per share to 0.4p.

This means that PCF’s shares are rated on a forward price-to-earnings ratio of 12, offer a prospective dividend yield of 1.1 per cent and are priced on 1.6 times forward price-to-book value. That’s not expensive for a fast-growing challenger bank that is over-delivering and diversifying its lending lines to de-risk execution risk. It’s also a low rating for a bank that’s just reported a post-tax return on equity of 10.3 per cent and has a 12.5 per cent target, and one that also boasts a common equity tier 1 ratio of 19 per cent to support the 50 per cent-plus lending growth targeted in the coming year.

PCF’s Aim-traded shares have produced a total return of 27 per cent in the 10 months since I included them in my 2018 Bargain Shares Portfolio during which time the FTSE Aim All-Share Total Return index has declined by 15 per cent in value. I expect the shares to continue their outperformance and have a 12-month target price of 50p. Buy.

[macc1] 07/12/2018 17:42

Short film to accompany their results today: