A leading provider of loans to the un-banked, with a handful of other businesses such as factoring. The balance sheet is technically full of cash, post asset sales, and the company repeatedly reported that its deposit base was strong and not at risk from the credit squeeze. Share price action says otherwise; repeated attempts to talk to management were rebuffed and when management does not return calls to its owners, sensible owners run.
London Scottish Bank (LSB) has been purchased as we feel it offers an attractive play on the likely slowdown in corporate and consumer credit-worthiness. Despite being best known for competing with Cattles and Provident Financial in the UK "lender of last resort" market, around 75% of its profits are now geared to the provision of debt recovery services and short term finance (via factoring and leasing) to UK corporates. These businesses are growing strongly and should continue to be sufficient to offset what will likely remain tough conditions for the 25% of profits that still emanate from the consumer credit arm. However, this latter business is not without hope - the management have taken an axe to the number of LSB branches (already cut from 100 to 66) and aim to save £2.5m per annum in costs. This could offer upside to forecasts if the company can show it is enough to compensate for the likelihood of rising bad debts. Even on lowly estimates for consumer credit, we see this stock as cheap, particularly as it also offers an attractive dividend yield of over 5%.
| Sedol |
Type |
Price |
Date |
| 0531607 |
Sell |
£ 0.347 |
09/01/2008 |
| 0531607 |
Buy |
£ 1.175 |
23/02/2007 |
| 0531607 |
Buy |
£ 1.17 |
22/02/2007 |
| 0531607 |
Buy |
£ 1.175 |
11/01/2007 |
| 0531607 |
Buy |
£ 1.175 |
10/01/2007 |
| 0531607 |
Buy |
£ 1.16 |
09/01/2007 |
| 0531607 |
Buy |
£ 1.104 |
15/12/2006 |
| 0531607 |
Buy |
£ 1.097 |
08/12/2006 | |
