S & U Share Discussion Threads

[gabsterx] 17/4/2019 17:19

What a great company, after the disaster I suffered at the hand of the crooks running Galliford Try S&U is a breath of fresh air. This is one of the only stocks I can buy confidently when the price goes down.

I would like to congratulate Anthony Coombs and his team for their integrity and talent, I'd gladly shake this man's hand.

[cascudi] 16/4/2019 11:28

Fantastic momentum

[togglebrush] 16/4/2019 11:08

Questor tip in Telegraph today

[plasybryn] 16/4/2019 09:46

On the move today.

[gabsterx] 10/4/2019 10:58

I hate you :)) Well done!

[jeffian] 09/4/2019 18:25

30%

8-)

[gabsterx] 09/4/2019 17:45

New interview with Coombs about the results and future prospects:

[...]

He's reiterated what I said in an earlier post: "Earnings from 2014 to 2018 went from 20M to 34M yet stock price has stayed the same, this is very illogical"

Just added 90 more shares today!

@jeffian I'm very jealous of how long you've been accumulating and don't even want to imagine your yield on cost!! :)

[cascudi] 08/4/2019 10:14

6.3pc dividend. Fantastic

[cascudi] 08/4/2019 09:38

Good value here in imo

[jeffian] 04/4/2019 11:14

Moi aussi. I have been holding and accumulating since April 2001.

[gabsterx] 04/4/2019 10:22

Thank you Jeffian, that makes sense. I'm not very familiar with market movements and trading trends that probably have a bigger impact on low volume stocks such as SUS. I'm a long term investor focused on dividend growth so I'm happy just to collect the fat yield and wait :)

[jeffian] 04/4/2019 09:43

Mind you, a 5%+ spread doesn't help. I was toying with buying some more but 1800/1900 - WTF?!

[jeffian] 04/4/2019 09:38

GabsterX,

The shares are very tightly held with little liquidity so for the vast majority of investors, it is simply off the radar. In those circumstances, the market takes a lazy approach of lumping together all those businesses it sees as being in the same 'area' and marking them up/down together. This will be tainted by the 'secondary lenders' tag, so problems at, say, Provident Financial will be assumed here too. The market may not even have grasped that we're no longer a 'doorstep lender' in the sense that some of them still think Whitbread is a brewer! Like you, I just rely on the fundamentals and let management get on increasing earnings and dividends. The share price will follow in due course.

[gabsterx] 04/4/2019 09:25

I still cannot understand how S&U can remain undervalued for so long, it seems the better their results are the lower the share price goes.. which of course for a value investor is an ideal scenario!

This means a higher starting dividend yield with a very strong CAGR and a safe payout ratio coupled with an upside potential on capital gains due to the depressed share price

While it's true that impairments are rising, I doubt the management's cautious approach would sacrifice quality of receivables for the sake of growth, they have not done so in 18 years and I don't see this as a red flag.

[chrismcglone] 28/3/2019 19:50

Thanks Plasy. Don’t know why but every time I see (hear) him speak I can’t quite marry the voice with the person :-)

[plasybryn] 28/3/2019 13:53

Might be of interest. Interview with Mr Coombeshttps://www.proactiveinvestors.co.uk/companies/stocktube/10641/s-u-still-seeing-strong-demand-for-motor-loans-but-has-tightened-lending-criteria-10641.html

[chrismcglone] 27/3/2019 19:17

Aleman, I always welcome a measured, informed counter view so thanks for posting. Compared to some of the other boards of stocks I hold, your analysis and observations are helpful. I am a long term holder here and bought for divi yield/growth. I just can’t fault the company on that measure. I do however share some of your caution but not enough presently to tempt me to part company.

Re the share price As I said, dividends are why I am in this stock so rarely fret. Likewise, the lack of perceived ‘true’ share price value is always a moveable feast imo. I also don’t think there is (or likely to be) sufficient free float to spark frenzied buying. I don’t think it would take too long to exhaust what must be a relatively small free float. One of the more obvious reasons for the spread and fairly significant movement up and/or down on relatively small trades.

I hope the company continues to remain boring and dull and the large % of stock held by family members is always reassuring. More of the same will do me until something significant forces me to change my views.

[gabsterx] 27/3/2019 11:58

Aleman, well spotted. I presume the increase in provisions is partly due to the switch to IFRS9 standards as the major increases were in Stage 3 phase. It could also be S&U taking extra provisions for the coming year due to the political and economic uncertainties surrounding the UK, so it might be an extra layer of protection.

Coombs also addressed this in his statement:
"Impairment including the impact of IFRS9 therefore was slightly higher than anticipated in 2018/19 and risk adjusted yield reduced to 24.6% in the year to 31 January 19 from 26.7% last year. Return on average capital employed remained healthy at 15.6% for the year to 31 January 2019 (2018: 16.1%). Further underwriting changes, which clearly recognise these high cost credit obligations, and marketing improvements to attract a better product mix, are designed to maintain returns and gradually return impairment levels to those of the past five years"

Even with the increased impairments we saw good growth in revenue, profits and net receivables for motor. Nevertheless this is something important to keep an eye on and will be closely monitoring it in the next update.

[aleman] 26/3/2019 17:56

I cautioned about trends in motor and did not mention the bridging finance. It contributed about 2.5% of pre-tax profit but it grew very quickly. Perhaps, Arden think exponential or just the rapid linear growth in bridging finance will overcome possible weakness in motor. Bad debts there are low and I presume would not expand with maturity since they tend to be very short term, and so personal circumstances change from such as job loss in a weakening economy are less likely to hit bridging than motor. Bridging might explain it but I have not seen their note so do not know. Have you seen their note?

[buffetteer] 26/3/2019 15:27

If that’s the case why are their broker Arden forecasting a 5.9% increase in earnings to 247p or +£2m ???

[aleman] 26/3/2019 13:21

Holders need to be careful with this one. I will update on the trend I warned about previously. Provisions, shown in note 6, continue to deteriorate despite all the talk of an improved system for managing quality

Motor receivables +£21m to £317m
Loss provisions +£13m to £58m.

At the interims it was +£20m and +£8m, so H2 has seen receivables rise £1m but provisions rise £5m, resulting in a fall in net receivables for the motor book in H2 after growth in H1. The motor book is writing off loans due faster than it is making new loans.

Also, note 3 compared to interims shows that H2 motor revenue shrank slightly from H1, so you might now have falling revenues possibly meeting rising costs or some small rationalisation costs.

I'd assume next year will be more difficult.

This is a continuation of a friendly warning to some familiar posters. I'm not short. A couple of years ago, I considered investing but decided I did not like the provisions trend and early signs of the economy topping out. I don't see this one blowing up but H2 has deteriorated slightly from H1 and I think this might be the best year for a while. (I'm no superinvestor, though. I've had other investments lose money in the last year so I'm not gloating. I should have cashed up.) Good luck.

[plasybryn] 26/3/2019 10:46

Well done Gabster. I support your numbers. It is amazing how wrong the market can be at times. Investing is usually quite difficult but when you get such a solid growth stock with rising dividends and low P/E it is relatively easy. Yet investors see a low price as a negative or assume something must be wrong. Great mgmt and great investment imo.

[jeffian] 26/3/2019 08:54

GabsterX, (#1443)

You're quite right about the yield, I had brain-fade I'm afraid! I was right about the conclusion though - to trust management to perform rather than worry about the market marking down the shares. It was a buying opportunity but, like others, I am stuffed to the gills with these at substantially lower cost anyway.

[topvest] 26/3/2019 08:16

All looks very good on first glance. Happy to hold. Aspen also seems to be shaping up nicely.

[gabsterx] 26/3/2019 08:11

5 year average PE is 15 which means share price should be around 3,500 if you follow historical trends.

I had done a more conservative dividend growth model approach that gave me 2,925

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

Conclusion, I just bought 100 more shares :)