DALLAS, TX -- October 27th, 2023 -- International Personal Finance PLC (LSE: IPF): Stonegate Capital Partners updates their coverage on International Personal Finance PLC.
Business Overview
International Personal Finance PLC (LSE: IPF) provides affordable consumer credit services in Europe, Mexico, and Australia. The Company’s customers are underserved, being unable to access credit from banks and traditional lenders. IPF offers a range of products including home credit, digital revolving and instalment loans, credit cards, and mobile wallets. The Company currently serves approx. 1.7 million customers in 9 international markets.
COMPANY UPDATES
- FY23 Continues Positive Trend: IPF reported strong net receivables up 4% year over year to £875M. Additionally customer lending declined 1% from prior year, however, was up 11% when excluding the transitional impact from operations in Poland. Annualized revenue yield was also strong, moving to 54.8% in 3Q23, up 4.0 points from 3Q22. Impairments remain in-line with expectations at 12.0%, in large part due to robust credit standards and despite the cost-of-living crisis. Lastly, the costs to income ratio is ahead of management plans, down to 56.7% in 3Q23. The Company remains on strong footing with £100M in liquidity available to meet funding requirements through 2024. Notably, IPF is still seeing strong customer repayment performance in large part due to the responsible underwriting and despite any impact from the cost-of-living crisis.
- Continued Expansion in Mexico: IPF continued its expansion into the Mexico Home Market by following the opening of the Tijuana branch in 2022 with the opening of the Tampico branch in March of 2023. The learning curve to get these locations seems to be short as the Company reported an increase of 5% customer lending y/y, customer numbers growing by 1.7% in the quarter to 710,000 and closing receivables growing by 7.5% to £185.0M. This is all served by the very critical first cohort of employees.
- Credit Card is Building Traction: The roll out of credit cards in Poland is on track with 100,000 cards issued. The current estimate is that credit card penetration is between 66% to 83% of year end targets, with the pace of uptake expected to maintain steady as the IPF continues to transition current customers. It is expected that the full transition of the Polish market will be completed by the end of 2024.
- Digital Strength Remains: Digital saw positive momentum in all markets as demand remains strong leading to an 12% increase in customer lending when excluding the impacts from the transition in Poland. Of note was the increase in gross receivables to £216M, which is up 7.0% year over year. When excluding operations in Poland and the collect-out markets of Spain and Finland, receivables grew 20%.
- Revised Guidance: Given the strong performance in all three segments leading to results that are ahead of expectations, coupled with the rise in global interest rates, management was comfortable revising their guidance in 1H23. This is headlined by a new revenue yield target range of 56% to 58%, up from 53% to 56%. This is in concert with the 15% increase in dividend payments per share to 3.1p, up from 2.7p in 1H22. This guidance has not been changed as of 3Q23.
- Valuation: We use a DCF Analysis and a Comparison Analysis to frame valuation. For the comparison analysis we used a combination of P/E, P/TBV, and EV/EBT multiples to determine a valuation range for IPF. When we blend these multiple comparisons, in combination with our DCF analysis, we arrive at a median price range of £1.73 to £2.26 with a midpoint of £1.99.
About Stonegate
Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.
