Yes the results are good if you look carefully but the headline was 'PCF Group annual profit flat' and that seems to influence the share price.
I have held this a while as it is clearly a share that will do well in the future - but I am beginning to think that it is not worth the wait and my money could be more profitably put somewhere else.
"The transition from a finance house to an authorised bank has long been seen as a potential game changer for LSE:PCF:PCF Group - and that could be coming to fruition sooner than expected. We liked the stock back in February, and now a bunch of ..."
Scraped this note from Research Tree, it's by Panmure: "We upgrade our estimates for the third time in 12 months based on continuing improved performance and exciting prospects. With a banking licence likely this year which should accelerate growth in the higher credit quality end of the book in a market with benign competition we believe the prospects for this increasingly low risk lender are outstanding."
Read Panmure's and Stockdales notes on Private And Commercial Finance (PCF), out this morning, by visiting https://www.research-tree.com/companies/uk/investment_platforms_%26_services/private_%26_commercial_fin_grp
Panmure says We last upgraded our estimates in December and once again the company is trading ahead. We will review our estimates in June when a full update on the progress on the banking license application will be provided. This is a transformational year for the company We are forecasting 17% PBT growth for the year starting to March 17. A banking license is likely to transform the growth prospects for the company
Stockdale says PCFG has announced that it will again beat (modestly) market expectations for the 12-month period to end March 2016. Accordingly, we are increasing our adj. PBT forecast to £3.5m (from £3.4m) for this period. With news that the banking licence application is progressing steadily and the £112m portfolio of receivables continuing to be of good quality we remain positive on PCFG..."
This little star performer continues to deliver solid results and with the growing expectation of a full banking licence, this has all of the potential to outperform against the market for some time to come.
Sometimes I am given to thinking that PCF would make a nice little takeover target. It seems to be a well run business with good systems in a business that others appear to be interested in. Moreover there is a large shareholder who might be interested in cashing in their investment. With a cap of around £40m it is but a tasty morsel.
Hello Roundish - Like you I am pleased to see this out of the way and glad it wasn't left until next year. I suspect though they were told that the application for a banking licence could not progress until the conversion took place.
It is good to get this trade out of the way since in some ways this has been hanging over the company for some time (and I still wish I could have had the trade these guys had!).
However, the business is solid and growing and now with the equity base is enhanced, this assists in debt/equity ratios and should hopefully further improve the ability of PCF to access and deploy funds at greater margin over time.The lending market is still hot and although a banking license will take them a long time to secure, this higher capital base will assist them in that negotiation.
This is a penny share that has a lot more potential IMHO.
.. which have been well received by the market. Bank application in the pipeline and talk of restructuring the balance sheet to enable a divi. While I would be happy to receive a divi I don't mind profits being retained to expand the business.
Current market cap is therefore set to rise substantially as they deliver on their normal business plan. If they can continue to improve margin then we should also see a substantial upside from where we are today in terms of share price.
I wasn't always a fan of boring businesses but this kind of boring I can live with! If they become a Bank, even better.
"Not wanting to put a dampener on things but given how annoyingly large the spread always is on this, if it actually did reach 17.3p middle, then the bid would probably be 16.5, ie 0.5p above the current offer."
Not wanting to put a dampener on things but given how annoyingly large the spread always is on this, if it actually did reach 17.3p middle, then the bid would probably be 16.5, ie 0.5p above the current offer.
It is painful to start a bank and the regulatory process is long and cumbersome. In essence you have to have everything in place before you get your license with all of the costs but none of the cheap deposits hence this will continue to be costly in the short term.
However, most of these costs can and will no doubt be capitalised and hence the impact on cash will be real but the impact on P&L less so.
The longer term of access to cheap deposits is however a worthwhile pursuit and hence as a small cap - this is a brave move and one that if it pays off, will be a huge asset for the business.
The cheapest you can get an EU banking license for is circa £5m. Once they have it, the benefits will build and build resulting in a transformation of this business in my view hence I fully support this strategy even though cash will be tight for the time being.
Not without risk - but if we all wanted risk free bets we would be getting risk free returns!
Krayl: I agree the excuse looks a little lame and that it doesn't look like PCF will be granted a licence anytime soon. I was struck by the words "We are currently selecting suitable IT systems and completing the regulatory business plan, and whilst this project is approximately three months behind plan, we remain confident it will progress in the first half of 2015". 'Progress' is one thing but the words suggest that there is months of work to be done. If a licence comes next year that would be great but don't hold your breath. The business is tiny and the FCA will want to be sure that the BP is robust.
The business does appear to be OK although I would say better than that.
I have a modest holding showing a modest profit but I would like to see further progress before adding more.
"The anticipated timetable for obtaining a Banking Licence has been affected by our recent office move, but we are confident that our proposition remains a compelling one."
That sounds a lame excuse. It's plain bad management to let a move interfere with your plans. The prospects without a banking licence look OK, but gaining a banking licence is THE thing for a good rise in the share price.
It doesn't sound like a Banking Licence is coming soon - what do others think?
PCF are slowly growing in confidence and slowly growing their book.
I doubt we will see the same appetite that SUS has shown, however, this is a recovery stock and small improvements can have a huge impact on the price hence I am quite happy to have my cash in PCF at present since my original investment is now at 120% profit and any hint of upside could quickly see that double or triple over a relatively short period.
I have topped up and if they stay around this level or dip, as I a sell out a couple of others, I would not be averse to buying a few more.
Good to hear that SUS did well. The door step lending and sale of insurance products to the financially challenged still leaves me nervous from an FCA regulatory risk viewpoint hence I see far more downside risk in SUS than upside profit - but it seems to have worked for you and them to date so please take my reservations with a pinch of salt!
Yes I did read many of your posts from way back and saw the negative ones.
I didn't take your posts as crowing - I enjoyed reading them against the background of the increase in sp. I like to read of the successes of others. Honest opinions are fine but it is the negativity of some that I cannot abide.
I too think that PCF has more to go - suspect though that a capital raising will be needed at some stage.
I did take a look at MFX but decided it wasn't for me.
I have no qualms on SUS - but each to their own. I like the long standing family involvement and more recently the possibility that they too might sell up. It is more than twice the value of Moneybarn though.SUS is seeking a banking licence and hence we can expect the regulators to be all over them in order to,ensure compliance.
Anyway, thanks again and good luck with your investments too.
Sorry - didn't mean to crow about it but as you will note if you read my trail on this stock all the way back I was very negative on it originally.
At the low point the bank funding to PCF was being cut and the Board were not cutting costs fast enough. What changed my view were the change in Board members; a revised focus on cutting out unnecessary costs; building more of a direct sales channel rather than relying on broker business and also the change in the attitude of wholesale lenders to sub-prime businesses from negative to mildly supportive to almost positive now outside of UK clearing banks.
Currently, their market cap is still less than their book value. Add to that their strategic focus to obtain their own banking license and the recent sale of MoneyBarn for £120m; the rise of SUS and the current focus on buying other similar businesses by UK and US PE houses - all of which gives me reason to believe that this is still trading at a considerable undervalue.
I don't mind sharing my views. Im not always right (I took a bath on VEC for example), however, I see PCF and MFX and Flowgroup as little gems in the market and all three of them are trading at an undervalue IMHO.
On SUS - they are a steady deliverer and although I don't hold them, I kick myself for not buying them 2 years ago but held back from a moral viewpoint. At the current price I think they still have more to grow but not at such an exponential rate as the above since they have chosen to grow organically only rather than leverage their position. However, they also have downside risk IMHO. Their desire to sell insurance at an inflated price to potentially vulnerable customers at the point of giving them finance is also a practise that I feel morally uncomfortable about even if it is legal. We have yet to see where the FCA goes to on such practises but I would imagine that if this has to stop, it could impact their steady growth or at least create a short term stumble. Secondly, their doorstop lending is long standing but since they pay their agents a percentage of the sums collected and these are also the same agents that sell customers the finance, while it works for SUS, again it leaves me uncomfortable. (They may have changed some of the practises since I last looked at them a couple of years ago so my view may well be out dated by now on SUS).
You appear to have done very well with PCF. Well done. Good job!
I own a number of financial shares from the likes of HSBC, STAN, LLOY and BKIR down to the likes of STB, OSB (which had good results today by the way) and SUS with some like IPF, PAG and PFG in between. I also own a bunch of fixed interest mainly in the financial sector but that is another story for another day.
Anyway against a background of a number of these second-liners - like SUS - seeking a banking licence I was intrigued by PFGs purchase of Moneybarn.
As I already own a good chunk of SUS and in any event the shares have flat-lined around £18 of late (am expecting a push-on soon!) I started looking around for similar shares and came across PCF. I liked what I saw - they too are seeking a banking licence - so I started buying in a small way a week or so ago. As you know, the market is thin, the company is small and it has a few major shareholders. The sp has increased in recent days and so while I was hoping to buy more but decided to stand back for the moment. My last purchase was 13p but I was quoted 15p to buy late this afternoon!
You must be showing a good profit.
Roundish this appears to be a little gem with good growth prospects. Let us hope the growth will continue.
Well done for spotting it so early.
PCF are currently tracking towards getting a banking license for the UK in March 2015.
If they achieve this they will benefit from:-
a) reduced dependence on wholesale lenders
b) a lower cost of capital than the current 5.4% cost implied by their P&L
c) greater opportunity to rapidly grow in a sector which is crying out for additional funding
The banking license will also make them a real acquisition target for the first time in several years since control over their own pools of liquidity will make them highly attractive to multiple parties who are keen to get hold of a banking license quickly.
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