S & U Share Discussion Threads

[gabsterx] 26/3/2019 07:48

"This will mean that dividends from S&U this year will be 118p per ordinary share against 105p in 2017/8 an increase of over 12.3%."

Love this company, agreed that it is a steal at this price. I'm already overwheight SUS in my portfolio but would still add more at these bargain prices!

[pugugly] 26/3/2019 07:45

All questions answered - Increased profits and dividends - No problems with regulations - Can go back to sleep for another year.

[saint or sinner?] 26/3/2019 07:44

Nice results - bargain at the current price.

[gabsterx] 26/3/2019 05:24

Yield is much higher than 4% it is around 6.6% as the payout is expected to be 117p compared to last year's 105p. SUS pays out 2 interims and 1 final which is why most websites like Yahoo report it wrong.

[jeffian] 25/3/2019 15:28

Well it looks as if the market isn't expecting good news tomorrow. Assuming growth in line with Interims, current PER is only just over 7x and divi yield near 4% so either something nasty is in the offing or it's a great buying opportunity. My experience of this management team over nearly 20 years is that it's the latter, but we'll see.

[gabsterx] 21/3/2019 07:42

Big drop yesterday, unjustified IMO so will add more shares if it remains at the same level or lower next month.

[jeffian] 15/3/2019 12:17

Having had a quick look at the FCA update, I cannot see anything to frighten the horses particularly. When it first came out, a lot of the focus was on new car sales using PCP lease/buy arrangements and as discussed here at the time SUS don't do any of that, being solely lenders to the used car market. SUS do use brokers, so I suppose they will come within the scope of the enquiry into whether brokers are influenced to recommend the finance scheme which pays the best commission rather than charges the lowest rate to customers, but I can't see that having more than a marginal effect if any.

[sophia1982] 15/3/2019 11:24

Thank you Jeffian, I have read the full 2018 report. However at that time the FCA was still in the early stages of its review.

[jeffian] 15/3/2019 11:11

This from the 2018 Report & Accounts -

"Regulation, Governance and Investors
We have seen new regulation including MiFIDII, the new General Data Protection Regulations which govern contacts we can make with customers, particularly former ones; and the review of the motor finance industry by the FCA.
The latter we view with equanimity, primarily because of the very high standards of service we offer our customers and the skill and forbearance we exercise throughout the customer journey and in particular when any get into genuine difficulty. Our collections, legal and under-writing departments at Advantage
have all been strengthened this year, and our processes and documentation are reviewed by RSM, our internal auditors, and by Shoosmiths, our consumer finance legal advisors. The results are regularly reported to the Audit Committee.
At Advantage, either directly or through our excellent trade body the Finance and Leasing Association, we have a good and longstanding relationship with the FCA; indeed our Director of Credit Risk, Alan Tuplin, serves as chairman of the Credit and Risk Committee within the FLA."


(by the way, sophia, if you edit your post to change the 'https' to 'hTTps' it will form a link)

[sophia1982] 15/3/2019 10:36

How can I be sure that the FCA will not impact the business of Advantage Finance?
Has anybody here discussed regulation with the management?

hxxps://www.am-online.com/news/finance/2019/03/12/fca-motor-finance-review-full-disclosure-could-be-imminent-says-ivendi

[gabsterx] 06/3/2019 07:11

Another way to value financials is using a Gordon Growth Model that uses dividend growth as a valuation metric. Since S&U has been a reliable dividend grower at between 10-18% for the past 10 years, I took a conservative 5% growth rate based on their next dividend and a return rate of 9%. It shows SUS to be undervalued by around 34%. With a 10% return rate it is still undervalued by 17%.

Next Div 117
Growth Rate 5%
Discount Rate 9.0%
GGM Value: 2,925.00


Next Div 117
Growth Rate 5%
Discount Rate 10.0%
GGM 2,340.00

[bench2] 05/3/2019 14:57

Thank you Pireric and Gabster ....... SUS should be known as Debt Rich Cash Flow Poor

[gabsterx] 05/3/2019 05:11

Pireric I also had the same issue when trying to do a DCF model as in FCF was negative, I think it should be valued on a NAV multiple or financial as you mentioned.

[cash rich asset poor] 04/3/2019 22:41

Its probably down on sentiment based on the FCA's publication today (below). The models in question aren't utilised by SUS so its probably a case of throwing the baby out with the bath water.



The FCA found that the widespread use of commission models which allow brokers discretion to set the customer interest rate and thus earn higher commission, can lead to conflicts of interest which are not controlled adequately by lenders. This can lead to customers paying significantly more for their motor finance.

The FCA is assessing the options for intervening in the market which would address the harm it has identified. This could include strengthening existing FCA rules or other steps such as banning certain types of commission model or limiting broker discretion.

Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA, said:

'We found that some motor dealers are overcharging unsuspecting customers over a thousand pounds in interest charges in order to obtain bigger commission payouts for themselves. We estimate this could be costing consumers £300 million annually. This is unacceptable and we will act to address harm caused by this business model.

'We also have concerns that firms may be failing to meet their existing obligations in relation to pre-contract disclosure and explanations, and affordability assessments. This is simply not good enough and we expect firms to review their operations to address our concerns.'

As part of its work the FCA also carried out mystery shopping of firms. The FCA found that where disclosures were given, these were not always complete, clear or easy to understand and as a result customers may not be given enough information to enable informed decisions. The FCA was also not satisfied that all lenders were complying with the rules on assessing creditworthiness including affordability.

The FCA will follow up with individual firms where failures were identified but expects all firms, both lenders and brokers, to review their policies, procedures and controls to ensure they are complying with all relevant regulatory requirements and are treating customers fairly.

[chrismcglone] 04/3/2019 18:57

Anyone’s guess why the fall. Has always been very illiquid and tightly held so takes very little to move the share price either way.

I bought a modest amount (and regretted for ever more not buying more) around £3, mainly for the kids, with a very long term view and for divie yield/growth. However, even so, I’ve always been a tad nervous about the relatively stellar rise, which peaked not that long ago. A few years sideways consolidation I can cope with.

Of all the stocks I’ve held over the years though, I can honestly say i’ve looked in on it least. It’s been a divie generating machine since I bought and that’s my only concern here. I tend to try and keep an eye out for the family buys/sells as occasionally over the years I’ve seen what appears to have been a bit of tax/estate planning.

Other than that it’s been pretty damn boring. Hopefully more of the same then for another 10 years.

[jeffian] 04/3/2019 14:42

I think you'll find this relates to PCP agreements discussed earlier in the thread. This does not relate to Advantage loans.

"Four-fifths of new car finance deals are now what are known as Personal Contract Purchase, or PCP.
Instead of buying a car outright, a PCP allows consumers to rent a car over a three or four-year period.
At the end of the period consumers can buy the car for its residual value (known as a "balloon" payment), hand the car back, or roll over the residual value into a new PCP on a new vehicle.
But problems have arisen because lenders have allowed brokers to set interest rates on the PCP agreements.
The FCA estimated that on a typical motor finance agreement of £10,000, higher broker commission can result in the customer paying around £1,100 more in interest charges over a four-year term of an agreement."

[pugugly] 04/3/2019 13:44

Could it be down to thsi BBC news item
Car buyers overcharged £1,000 by dealers for loans, says watchdog



Though from memory this is not the Advantage business model - Anyone know for sure?

[pireric] 04/3/2019 12:33

Anyone done any underlying cash flow generation calculations on this? Hard to tell because of the working capital how much cash in generates without running some numbers

Thanks

[jeffian] 04/3/2019 10:22

#1426

The second hand car market is quite different from new cars. Historically, SUS car finance division has continued to trade strongly even in periods of falling new car sales. Put simply, SUS customers need cars and will meet their needs in the secondhand car market whether prices are stable or falling. This from the trading statement only a few weeks ago -

"Advantage Finance, our motor finance subsidiary continues to produce record profits despite greater competitive conditions and the seasonal slowdown in the motor finance market being more pronounced than usual this year. The number of new Advantage finance agreements for the financial year are still at their second highest ever level and applications for motor finance remain strong. Debt quality is consistent with, and beginning to respond to, the underwriting changes made earlier in the year and monthly collections in January exceeded £12m for the first time. Following the slower recent transaction levels, net motor finance receivables at year end were c.4% up on last year whilst total "live" accounts are up 9% on last year at just over 59,000.

Used car values and volumes, including those of modern diesel vehicles, continue to outperform the new market both in the franchise dealer and independent retailer sectors. This, coupled with further investment in Advantage products and distribution systems, should provide a firm base of demand for renewed growth in transactions for Advantage in the coming year."

[gabsterx] 04/3/2019 10:08

SUS is one of the few stocks where I get genuinely excited when the share price drops, I quickly topped up at 19, will add more if it drops!

[bench2] 04/3/2019 09:54

Heavily linked to sales of second hand cars ......... so I assume the mark down is based on the current malaise for auto related stocks both manufacturers and retailers in a post diesel world .

[pugugly] 01/3/2019 15:12

A very illiquid stock - Someone needed to sell significantly more than nms (imo)

[jeffian] 01/3/2019 15:08

Ouch! What happened there?!

[plasybryn] 19/2/2019 13:47

Tight range during period of share price consolidation. Getting ready to break out soon perhaps.

[pugugly] 06/2/2019 08:05

Increased special div - A well run company - If the rest of UK coys were as well run as SUS UK would be a world beater-