Two months ago I wrote about, what I considered to be, the attractions of investing in the shares of Ramsdens Holdings (LON:RFX), the specialist lending group.
That was on Tuesday 6th August, after the pawnbroker and jeweller had reported a positive Trading Update for its year to end-September.
The Business
The Middlesbrough based group, which is FCA authorised for its pawnbroking and credit broking activities, operates some 169 stores in the UK, which also includes one franchised store, additionally it also has a growing online presence.
The group defines itself as a growing, diversified, financial services provider and retailer, operating in four core business segments: foreign currency exchange, pawnbroking loans, precious metals buying and selling, and the retailing of second hand and new jewellery.
Pre-Close Trading Update
Ahead of announcing its Final Results for the year to end-September, due on 14th January next year, the group last Thursday issued some corporate information about its trading in the last year.
In August it informed the market that it had enjoyed another year of record performance.
It now expects to report profit before tax of at least £11m (FY23: £10.1m) and noted that its positive trading momentum sets the business up well for continued growth in FY25.
Management Comment
CEO Peter Kenyon stated that:
"We're pleased with the record profit performance in FY24.
All key income streams are growing and we have optimism for further progress in FY25.
This performance once again demonstrates the strength of our diversified business model which underpins our long-term growth strategy."
Analyst’s Views
At Panmure Liberum, its analysts - James Allen, Joe Byrne and Rae Maile - rate the group’s shares as a Buy.
They have set a Price Objective of 305p on its shares.
The analysts are estimating that the 2024 year will have seen some £95m (£84m) in sales, with pre-tax profits rising to £11.2m (£10.1m), lifting earnings to 25.6p (24.0p) and its dividend to 11.2p (10.4p) per share.
For the year just started they anticipate £97m of sales, £11.2m profits, 25.7p earnings and a dividend of 11.4p a share.
The analysts conclude their note after yesterday’s statement by stating that:
“We retain our BUY recommendation and 305p target price, based on a blend of a FY 25 P/E valuation and a dividend discount model.
The shares are trading on a modest CY 24 P/E of 8.0x.
We think that is too cheap when closest peer H&T is on 7.2x, Ramsdens has a more diversified operating model, and has a better track record of delivering upgrades.
A dividend yield of 5.5% is also much higher than the c.4% average since listing.”
In My View
The shares of Ramsdens Holdings, at 207.5p, are looking far too cheap on just 8 times earnings.
I can understand why the Panmure Liberum analysts rate them as a Buy, so I would suggest that an early rise to 245p or thereabouts is more than possible.
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